Despite Roku Inc.'s strong position in the streaming market, analysts say the company could still see a negative impact from the COVID-19 pandemic.

Best known for its line of streaming boxes and sticks, Roku also earns a large portion of revenue from video advertising. The company has two revenue segments: player and platform. The former comes from hardware sales, while the latter and larger segment, platform, earns revenue through advertising and subscriptions.

Roku reported between 70% and 80% of its platform segment revenue coming from advertising, according to a recent note from SunTrust Robinson Humphrey analyst Matthew Thornton. And the platform segment accounted for more than 70% of total revenue in the second quarter, bringing in $232.6 million, versus player revenue of $88.2 million.

Citing commentary from Roku CFO Steve Louden, Thornton said that growth in Roku's second-quarter advertising business will be "substantial," but lower than it would have been without the pandemic. Roku is set to report second-quarter results after market close on Aug. 5.

Needham and Co. analyst Laura Martin said she believes advertising will come in strong due to higher usage.

But Wedbush Securities analyst Michael Pachter is less bullish, predicting that second-quarter results for Roku's ad-supported video-on-demand service will probably be "terrible."

He cited advertising hits reported across other digital outlets such as Facebook Inc. and Alphabet Inc. Facebook saw the average price per ad drop 21% in its second quarter.

However, with the stay-at-home period likely driving higher Roku device sales and increased digital viewing, Pachter believes Roku is well positioned for the long-term.

"We think Roku's valuation will remain volatile as the company navigates a recession while expanding internationally; however, we think Roku could be a prime beneficiary as ad spend is diverted from TV to OTT and will certainly expand again in a post-recession environment," the analyst said in a July 31 earnings preview note.

He maintained a "neutral" rating on the stock and a $136 price target.

While the company's streaming stick and other player device revenue has been lumpy over the past few years, with the company trading low margins on devices to get users into its higher-margin advertising and subscription businesses, player sales could see an unexpected boost in the quarter, Needham's Martin said. Prior to the pandemic, families may have been fine with a single smart TV. But during the shelter-at-home period, many parents were likely turning old TVs into smart TVs with Roku devices so the family could watch in different rooms, she said.

"I believe the environment is really positive for them," Martin said.

MoffettNathanson analyst Michael Nathanson echoed Pachter's comments on Roku's long-term position as he initiated coverage on the company with a "neutral" rating and a $145 price target.

"Investors own Roku as a proxy for all things streaming," he said.

Nathanson predicts that ad-supported video-on-demand spending will grow 34% per year on average for the next five years, up to $14 billion by 2024. The company is relevant enough in the industry to flex distribution muscle against new, big-budget platforms like AT&T Inc.'s HBO Max and Comcast Corp.'s Peacock, neither of which have reached an agreement for carriage on Roku devices. However, as large media conglomerates consolidate the industry, Roku's position could be threatened.

"While we see value in Roku as a gatekeeper, with even perhaps M&A as a possibility down the road if other companies are not able to successfully launch competitive services, we believe the stock is fairly priced at these higher levels," Nathanson said.