The hits keep coming to Roku (ROKU -3.53%). Last week it was a pair of analyst downgrades for the streaming video pioneer, more dirt on top of a stock that is now 84% below the all-time high it notched last summer.

The bullish counter to the malaise is that the platform continues to grow in popularity. Roku closed out its latest quarter with a record 63.1 million active accounts, and average revenue per user continues to inch higher sequentially the way it has in every report in its publicly traded tenure. Roku is getting bigger at every three-month check-in, but the stock keeps getting smaller. Is Roku a buy opportunity here, or is the market discounting a grim future for the company that started it all when it comes to video streaming through your TV? Let's take a closer look.

A couple and their dog on the couch as they channel surf with a remote.

Image source: Getty Images.

The upside of downgrades

MoffettNathanson analyst Michael Nathanson downgraded Roku last week, taking his rating from market perform to underperform. He was surprised to see the stock recovering after the weak guidance for the current quarter it had provided two weeks earlier. He feels that the market is getting more competitive and that Roku will have to sacrifice margins to invest if it wants to stand out in a field dominated by well-financed tech giants. 

Nathanson has a price target of $62 on the stock, coincidentally the exact multi-year low it hit three weeks ago after posting its disappointing financial update. The goal suggests 21% of downside from Wednesday's close. It doesn't seem fair. 

Yes, Roku had a rough report. It's eyeing just 3% in year-over-year revenue growth for the current quarter, and it pulled its full-year guidance entirely. It has suffered on the low-margin hardware end over the past year on supply chain constraints and general shopper apathy, but its more important high-margin platform business is also showing signs of slowing. However, this is a stock that has fallen precipitously over the last 13 months. Does Nathanson really think that this stock -- should it hit $62 -- is worth 13% of where it was at its high last year?

Earlier in the week, it was Jeffrey Wlodarczak at Pivotal Research downgrading Roku, also taking it from a neutral hold to a bearish sell rating. He's also concerned that Roku is spending more at a time when many economists are pointing to an economic slowdown next year. With ad revenue historically vulnerable in a recessionary environment, he sees weak revenue growth and large losses next year and possibly into 2024. He's so bearish that he views Roku as a fundamental short. 

I don't see it that way. The hardware issues aren't ideal, but Roku is a platform business now. Having a strong presence with its dongles is great, but it's still the factory-installed operating system in a growing number of smart TVs. There will be challenges to Roku's critical platform business if advertisers pull back, but we've seen bearish theories fail to play out here. 

A year ago worrywarts were arguing that we wouldn't be as engaged with streaming TV as cities opened up again post-pandemic. Well, the 19% year-over-year increase in streaming hours is growing faster than the 14% increase in active accounts. We're streaming more, not less. Roku's investments in proprietary content are risky, but they're also making the platform stickier with its users. Roku continues to be the top dog among streaming video stocks, and betting against the leader or even the industry seems to be short-sighted through what should be short-lived turbulence. The risks are certainly there, but the same can also be said about the upside if Roku is able to get back on track.