Roblox Corp (RBLX)

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Roblox Stock Downgraded to Hold at Truist on Valuation and Competition
By: Investing.com | June 17, 2022

Truist analyst Matthew Thornton cut rating on Roblox Corp (NYSE:RBLX) shares to Hold from Buy after weak May metrics.

The analyst has a $29.00 per share price target on Roblox shares.

Thornton names 4 key reasons behind the downgrade.

1. RBLX screens least favorable on revision trend as the analyst expects the company to continue to invest aggressively;
2. RBLX screens least favorable on valuation;
3. RBLX screens least favorable on exposure to headwinds and tailwinds; and
4. RBLX screens least favorable on capital returns and M&A optionality.

Moreover, the analyst sees a major headwind in rising competition, especially from the new Epic-Lego partnership.

“The former’s expertise in the engine/creator tools (Unreal Engine) and large-scale experiences (Fortnite) and the latter’s brand and overlap with RBLX’s core demo,” Thornton told clients in a note.

Furthermore, “the progress around other platforms, for example Meta's (NASDAQ:META) given that company’s resources, could be a headwind for RBLX (from a newsflow perspective at a minimum).”

Roblox shares are up almost 1% in pre-market Friday.

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