Expanding its presence abroad is one of Roku's (ROKU 0.31%) core growth strategies going forward, but one Wall Street analyst isn't so sure about the timeline. KeyBanc downgraded Roku shares this week from overweight (equivalent to buy) to sector weight (neutral), with analyst Justin Patterson removing his previous price target of $228.

With the stock already hitting that level, KeyBanc now has concerns over valuation.

Roku interface displayed on a flat-screen TV hung on a wall above a sideboard and next to a side table and a potted plant

Image source: Roku.

Near-term opportunities are already priced in

Roku shares have gained nearly 70% year to date as the COVID-19 pandemic drove engagement during stay-at-home orders. Unsurprisingly, people end up watching more TV when they're stuck at home. The macroeconomic uncertainty weighed on ad budgets, which in turn impacted Roku's advertising business, but that headwind should be short-term in nature.

Considering the gains so far in 2020, KeyBanc believes that Roku's near-term opportunities -- recently finalizing a deal with Comcast's Peacock and expectations of inking a similar accord with AT&T's HBO Max -- are already priced into the stock. The standoff with Comcast had revolved around disagreements over how to split advertising revenue, but now that the companies have agreed on (confidential) terms, Patterson believes that Roku will enjoy some upside in the fourth quarter since Peacock has a strong ad business.

While Roku's ambitions abroad have a lot of potential, KeyBanc expects the geographical expansion strategy to take longer to play out. The company's business remains highly concentrated in the U.S., with international markets historically representing less than 10% of revenue, according to regulatory filings. Roku is just getting started in markets like Canada, Mexico, Brazil, and the U.K.

"However, Roku is still in the early stages of [international] expansion, and coming from behind in markets where Android (Europe) and TV OEMs (Asia) have large installed bases," Patterson wrote in a research note to investors. "Barring signs of more meaningful progress internationally, we struggle to see the [valuation] multiple expanding further."

International growth is just beginning

Roku CEO Anthony Wood estimates that there are around 1 billion households worldwide with broadband access, predicting that they will "all be streaming eventually," and adding that "we're seeing good progress." With 43 million active accounts currently, that's a massive market to pursue that can drive growth for years to come -- at least once Roku starts to gain momentum.

Streaming player sales doubled in Canada and the U.K. in the second quarter, although that growth is off a fairly small base. International active account growth is outpacing the U.S., but again that's partially due to the small base of international accounts versus a U.S. market that's fairly mature.

CFO Steve Louden, who recently changed his mind and decided to stay with the company, has said that Roku will eventually break out international metrics for reporting purposes once those figures become more material to the business. Roku is scheduled to report third-quarter results next month on Nov. 5.