What happened

Shares of Roku (ROKU 1.36%) got clobbered Wednesday, sinking as much as 10.2% early in the day. As of 11:11 a.m. ET, the stock was still down 9.6%.

The catalyst that sent the streaming pioneer lower was an unfavorable ruling in a patent infringement case and a couple of price target reductions by Wall Street analysts -- but the news isn't as bad as it seems.

So what

The U.S. International Trade Commission (ITC) reached a decision in a dispute between Roku and Universal Electronics (UEIC 3.00%), a maker of universal remotes. In a mixed ruling, the ITC found that the remotes used by several Roku products -- primarily older versions of its Soundbar and Roku Ultra streaming device -- infringed on Universal's patents.  As a result, the ITC issued an import ban on the products at the heart of the case.

Family watching television together while sitting on the couch.

Image source: Getty Images.

It's important to note that Roku has already redesigned the products in question, developing a work-around that bypasses the patented technology, and the ITC ruled that the "revised Ultra and Soundbar products do not infringe the asserted claims."

Roku's vice president of litigation and intellectual property, Joe Hollinger, has previously said in a statement that the decision "fully absolves" the company, noting that it had already redesigned around the offending patent. 

Now what

Exacerbating the downward stock move were two price target reductions issued by Wall Street analysts. Morgan Stanley lowered its price target from $295 to $190, while J.P. Morgan reduced its target from $435 to $315.

Not everyone is sounding the alarm. Benchmark analyst Daniel Kurnos reiterated his buy rating on the stock and the firm's $525 price target, which suggests upside of roughly 127% compared with Roku's closing price on Tuesday. Kurnos believes that the impact on Roku from the ITC decision "appears overstated."

Roku stock is currently down 58% from its highs reached earlier this year, dragged lower by slowing subscriber growth and reduced streaming hours in the third quarter. However, given the loosening of pandemic-related restrictions, summer vacations, and tough comps from last year, this wasn't particularly surprising.

For investors with a long-term outlook, this likely represents a buying opportunity for Roku stock.