Here's why the steep sell-off in Roku stock is overdone and the shares are set to soar 56%, according to Bank of America

• The 35% sell-off in shares of Roku is overdone, and investors should maintain a bullish outlook on the streaming platform, Bank of America said in a Tuesday note.
• The bank reiterated its $500 price target for Roku, representing potential upside of 56% from Monday's close.
• BofA thinks Roku will be able to hold its own against imminent competition from Amazon in the connected TV space.
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The two-month, 35% sell-off in shares of Roku is "overdone" and represents a buying opportunity, Bank of America said in a note on Tuesday.

The bank reiterated its $500 price target for the maker of the popular streaming box, representing potential upside of 56% from Monday's close. "Thesis remains intact and a secular shift to streaming continues," BofA said.

Roku's steep sell-off could partly be attributed to Amazon's decision to launch its own smart-connected TVs, investor focus shifting to return to work and school stocks, and Disney's decision to release the rest of its 2021 movie lineup in theaters exclusively before sending them to streaming platforms.

But BofA is not fazed by those temporary drawbacks, and says Roku will be able to hold its own against increased competition from smart-connected TVs that utilize Amazon's Fire or Google's Chromecast platforms.

The bank gave a handful of reasons why Roku's investment positives remain unchanged, including its large scale, the ongoing shift of ad spend to streaming, its large international opportunity, and its push into developing more original content.

BofA also increased its average revenue per user estimate for Roku "given strong performance at the upfronts, and as Roku becomes a more attractive platform for advertisers to spend," BofA said.

Despite the positive note from Bank of America, shares of Roku fell more than 3% Tuesday amid a broad sell-off in high growth technology stocks due to a rise in interest rates.