Needham Initiates Roblox at Buy With $136 Price Target
09:08 AM EST, 12/17/2021 (MT Newswires)
Roblox (RBLX) has an average outperform rating and a price target range of $70 to $150, according to analysts polled by Capital IQ.
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Roblox rolling over despite strong November metrics as investors shun growth stocks
Briefing.com - 3:14 PM ET, 12/15/2021
Roblox (RBLX) is piling up some losses today after the creator of a virtual world building game reported November metrics that look quite strong, including a 35% yr/yr increase in daily active users (DAUs) to 49.4 mln. The solid growth is especially impressive since RBLX is lapping a difficult yr/yr period in which gaming was still experiencing a surge in activity due to the virus. For instance, for the three months ended December 31, 2020, DAUs nearly doubled yr/yr to 37.1 mln. What today's report indicates is that a return to pre-pandemic behaviors and activities isn't having the significant impact that some investors had feared, illustrating that RBLX's popularity remains robust as the metaverse expands.
However, the stock is still diving lower despite the strong metrics for November. We believe there are a few primary causes for the weakness. First, it appears that DAUs and estimated bookings of $208-$211 mln (+22-24%) slightly missed analysts' expectations. Additionally, bookings growth slowed a bit from the 28% mark generated in October. Lastly, investors are dumping growth stocks as the prospects of a more hawkish Fed looms over the market.
The overarching story, though, is that momentum is in RBLX's corner as it transitions into a leading metaverse play, rather than just an online game. As a recent example, RBLX announced a new brand partnership with kid and teen-oriented clothes and shoe retailer Vans, providing users with virtual skateboarding experiences. Additionally, the company is breaking into the music industry by offering virtual sessions and listening parties with artists. Experiences like these represent the future for RBLX as the metaverse unfolds.
Overall, it's hard to complain too much about RBLX's metrics. With hours engaged up by 28% yr/yr to 11.2 bln, it's clear that RBLX remains very popular. As we continue into the colder winter months, we'd also expect hours engaged to steadily increase.
The main takeaway is that we believe today's sell-off is more a function of an ongoing rotation out of growth stocks, rather than an indictment on RBLX's fundamentals.
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