On Monday, TD Cowen upheld its Sell rating on Roblox Corp . (NYSE:RBLX) with a steady price target of $35.00. The firm's analysis indicated potential risks to the company's fourth-quarter performance, noting a continued decline in top grossing ranks for Roblox on iPhone and Android platforms.
The firm's scrutiny was partly based on its monthly Mobile Gaming report released three weeks prior, which hinted at Roblox possibly falling short of its Q4 guidance. The report's findings have been supported by the subsequent downward trend observed in the game's performance across major mobile platforms.
TD Cowen's analyst pointed out that recent concerns over child safety on Roblox's platform could be influencing the company's bookings. Although the impact of these reports on the company's financial results is not definitively established, the suggestion of a correlation has been made by the firm.
Roblox Corp. has faced scrutiny in the past over the safety measures it employs to protect its younger audience. The platform's user base, which includes a significant number of children, makes this an important aspect of the company's operations and public image.
The maintained Sell rating and price target reflect TD Cowen's cautious stance on Roblox Corp.'s stock, considering the potential challenges it may face in meeting its financial targets for the quarter. The firm's analysis serves as a note of caution to investors regarding the company's near-term prospects.
In other recent news, Roblox Corporation has witnessed a surge in earnings and revenue growth. The company reported a 29% increase in revenues to $919 million and a 34% growth in bookings, reaching $1.13 billion. This impressive performance has led to several financial firms revising their price targets for Roblox. Citi has increased its price target to $63, while Deutsche Bank (ETR:DBKGn) and Needham have raised their targets to $60. BTIG has lifted its price target to $56, and Macquarie raised its price target to $58.
The company's daily active users (DAUs) also grew by 27%, reaching 88.9 million. Roblox's fourth-quarter bookings guidance stands at $1.34-$1.36 billion, representing a 20% year-over-year increase. These developments follow the company's strong third-quarter performance and the revised full-year outlook.
Analysts from various firms, including Deutsche Bank and Macquarie, remain optimistic about Roblox's future. They attribute the growth momentum to significant improvements to the platform, such as improved discovery, personalization, and dynamic pricing.
InvestingPro Insights
While TD Cowen maintains a cautious stance on Roblox Corp. (NYSE:RBLX), recent InvestingPro data reveals some interesting contrasts. Despite concerns about Q4 performance, Roblox has shown strong revenue growth, with a 27.98% increase over the last twelve months as of Q3 2023. This aligns with an InvestingPro Tip indicating that analysts anticipate sales growth in the current year.
However, profitability remains a challenge for Roblox. The company's operating income margin stands at -34.91%, supporting another InvestingPro Tip that Roblox is not profitable over the last twelve months. This financial performance context adds depth to TD Cowen's Sell rating and $35 price target.
Investors should note that Roblox's stock has shown significant momentum, with a 51.15% price return over the past six months. This strong performance, coupled with the company's high Price / Book multiple of 170.63, suggests that market sentiment may be at odds with TD Cowen's analysis.
For a more comprehensive analysis, InvestingPro offers 8 additional tips on Roblox, providing investors with a broader perspective on the company's financial health and market position.
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