BMO Capital maintained its Outperform rating on Roblox Corp. (NYSE: RBLX) with a steady price target of $56.00 in the wake of observed growth in daily active users (DAUs) and downloads, as indicated by Sensor Tower data, which showed an acceleration year-over-year into the second quarter of 2024, after a slower initial period in the first half of April.
Roblox's stock has rebounded from its first-quarter sell-off, where it dropped 22% on May 9, and has now risen 4% above its pre-decline value. This recovery is in contrast to the S&P 500's increase of 5%, implying that the market may have already accounted for the company's improved user engagement. BMO Capital has raised its estimates for Roblox's bookings in the second quarter of 2024 and for the full year by 3% and 2%, respectively, aligning with the higher end of the company's guidance.
The firm's confidence in Roblox is underpinned by the company's performance and its ability to capitalize on its substantial and expanding DAU base, which is reported to be around 78 million. BMO Capital also highlights the potential benefits from Roblox's prepaid advertising opportunities, which could provide additional revenue streams for the company moving forward.
Meanwhile, Roth/MKM has raised the price target for Roblox shares to $42, citing potential for a second-quarter beat due to strong user engagement. Jefferies, while maintaining a Hold rating, lowered its target to $42, expressing concerns about the company's growth and margin expectations. Wells Fargo increased its price target for Roblox to $43, maintaining an Overweight rating based on improvements in user engagement data. Macquarie initiated coverage on Roblox with an outperform rating and a price target of $46, highlighting the platform's unique position in the gaming industry.
InvestingPro Insights
Roblox Corporation's (NYSE: RBLX) recent performance has been a mix of challenges and achievements. The company's market capitalization stands at a robust $25.96 billion, underscoring its significant presence in the gaming industry. Despite a lack of profitability in the last twelve months and a negative P/E ratio of -21.86, analysts are optimistic about Roblox's sales growth potential in the current year. This expectation aligns with the observed 25.69% revenue growth over the last twelve months as of Q1 2024. However, investors should note the company's weak gross profit margins, currently at 20.85%, which may impact bottom-line results.
Roblox's stock price movements have been quite volatile, with a 1-year price total return of 4.21%, reflecting the dynamic nature of the gaming sector and investor sentiment. Two notable InvestingPro Tips for Roblox include the company holding more cash than debt on its balance sheet, which may offer financial flexibility, and the absence of dividend payments, which indicates that the company is reinvesting earnings back into growth initiatives. For investors seeking deeper analysis and more InvestingPro Tips, there are additional insights available on InvestingPro's platform. Use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, and explore the full range of data and expert commentary to inform your investment decisions.
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