Roblox Corp (RBLX)

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Roblox gains after luring new bulls
By: Investing | October 27, 2023

Roblox (NYSE:RBLX) shares gained 3% in early trading Friday after a pair of bullish analysts' notes.

First, analysts from Raymond James initiated coverage on the gaming platform with a Strong Buy rating and $41 price target citing its long-term growth prospects.

The analysts highlighted five key factors for their bullish view: "1) long term shifts toward video gaming in young people’s entertainment time budget, with pandemic shifts more durable than not; 2) strong opportunities for RBLX to grow its user base in international markets and older (age 17-24+) cohorts; 3) relatively early stage of on-platform economy sophistication with revenue opps like advertising starting to be realized; 4) expansion potential into non-gaming areas like education; and 5) the ability to leverage generative AI to make the platform more attractive for creators, accelerating the creator/user content flywheel."

Not to be outdone, analysts from Truist Securities upgraded the stock to Buy from Hold with a $37 price target (up from $35). The analysts see a path to 20% upside to 2025 EBITDA.

"We’re upgrading RBLX to Buy as we see a path to 20% upside to consensus 2025 AEBITDA driven by: 1) the core business; plus 2) immersive advertising; 3) new platforms; and 4) transition away from engagement-based developer subsidies; with 5) additional optionality (upside or cushion) around real commerce and/or AI-driven cost efficiencies," the analysts commented in a note to clients.

The analysts view the upcoming November 15th Investor Day as an opportunity for the company to provide a path to achieve and sustain 20% growth.

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