Roblox Remains Painfully Expensive With Ample Room For Further Deterioration, Analyst Says

• Needham analyst Bernie McTernan reiterated his Buy on Roblox Corp (NYSE: RBLX) and raised the price target to $42 from $39.

• Following a problematic November, RBLX bounced back in December and posted better-than-expected results virtually across the board, including better-than-expected DAUs, bookings, and hours of engagement.

• The critical question is how much of this beat is organic versus one-time benefits like holiday gift cards and one extra weekend day.

• The analyst assumes the beat was primarily organic and forecasted high teens reported bookings growth in FY’23E, relative to the 21% constant currency growth in December ’22.

• McTernan noted that revenue missed his expectations, although the analyst continues to believe bookings are a better metric for monetization and views revenue as more of an accounting output.

• McTernan’s estimates move higher in ’23E and beyond, leading to the price target boost.

• Benchmark analyst Mike Hickey had a Sell rating with a $21 price target.

• RBLX reported Q4 net bookings that were slightly better than the consensus view but disappointed Benchmark estimates.

• RBLX plans to remove forward KPI transparency, which the analyst views as a negative development.

• Following the expected release of March 2023 monthly metrics in April 2023, RBLX will cease publishing monthly metrics.

• The analyst believes RBLX’s video game platform is vulnerable to current and emerging negative macroeconomic trends, including inflation, unemployment, and wealth reduction.

• Hickey was astonished over RBLX’s decision to continue elevated investment spend that should exaggerate a significantly challenging operating environment and deteriorate free cash flow.

• The analyst saw continued execution risk on both revenue growth and profitability.

• The analyst thinks RBLX remains painfully expensive, with meaningful room for further valuation deterioration.

• Hickey believes a lack of clear vision and discipline have challenged the CEO.

• Price Action: RBLX shares traded lower by 3.73% at $35.74 on the last check Wednesday.

Story continues

Latest Ratings for RBLX

View More Analyst Ratings for RBLX

View the Latest Analyst Ratings

Don’t miss real-time alerts on your stocks – join Benzinga Pro for free! Try the tool that will help you invest smarter, faster, and better.

© 2023 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.