Guggenheim raised its recommendation of Roku to buy from neutral on Wednesday, as the firm sees the stock jumping nearly 28% over the next year due to strength in advertising on streaming platforms.

"We see continued growth in account and streaming metrics, closing of the video advertising pricing gap with traditional television, demand by third parties for audience development opportunities, and incremental content distribution revenue recognition as key catalysts for shares," Guggenheim analyst Michael Morris said in a note to investors.

Roku shares climbed 8.7% in trading to close at $101.71 a share.

Guggenheim believes Roku's first quarter earnings results "were representative of the core trajectory" for the company's key business lines, Morris said.

"Roku is one of the only pure-play streaming video companies and is uniquely well positioned to benefit from the continued audience shift to digital video consumption," Morris said. Roku generated 4 cents in advertising revenue per hour in the first quarter, compared to the 19 cents per hour that traditional TV generates, Guggenheim said.

Guggenheim also increased its price target on Roku shares to $119 from $75.