On Tuesday, Citi has increased the price target for Roblox Corp. (NYSE:RBLX) to $63, up from the previous target of $53, while reiterating a Buy rating on the stock. The adjustment follows the company's third-quarter financial performance, which surpassed consensus forecasts in several key metrics.
Roblox reported higher than expected bookings, average bookings per daily active user (DAU), and an increase in DAUs, leading management to revise their full-year guidance upwards. In response to the third-quarter results and the revised full-year outlook, Citi has updated its financial model for Roblox, projecting an increase in net bookings and adjusted EBITDA for the years 2025 through 2027.
Despite the positive adjustments, Citi's updated model indicates a slight decrease in estimates for DAUs and free cash flow (FCF). The firm also shifted its valuation year from 2025 to 2026, which contributed to the new price target. The target is based on a valuation of approximately 35 times the forecasted free cash flow plus net cash.
The analyst at Citi highlighted these updates and the rationale behind the maintained Buy rating, emphasizing the robust quarter and optimistic future projections for Roblox. The company's performance and the subsequent financial adjustments underscore the confidence in its growth trajectory and operational success.
In other recent news, Roblox Corporation has seen its stock targets raised by multiple financial firms following a strong third quarter. Deutsche Bank (ETR:DBKGn) lifted its target to $60, citing robust bookings of $1.13 billion, a 34% year-over-year increase. The firm attributes this success to advancements in AI-driven algorithms, improved payer conversion rates, and increased average bookings per daily active user (DAU), which grew to 88.9 million, a 27% year-over-year rise.
Macquarie also raised its price target to $58, praising Roblox's ability to leverage its operations effectively. Needham, BTIG, and Barclays followed suit, raising their targets to $60, $56, and $50 respectively, all acknowledging the company's strong earnings and revenue growth. Notably, Roblox reported a 29% surge in revenues, reaching $919 million, and a 34% growth in bookings, hitting $1.13 billion.
Roblox's fourth-quarter bookings guidance stands at $1.34-$1.36 billion, representing a 20% increase year-over-year at the midpoint, which is 4% higher than analyst expectations. Firms such as Deutsche Bank and Macquarie remain optimistic about Roblox's future, noting that the growth momentum is driven by significant improvements to the platform.
Despite the robust performance, the fourth quarter will be compared to the prior year's PlayStation launch, with guidance assuming flat growth for console bookings.
InvestingPro Insights
Roblox's recent performance aligns with several key metrics and insights from InvestingPro. The company's revenue growth of 27.98% over the last twelve months as of Q3 2024 supports Citi's optimistic outlook. This growth is further reinforced by an InvestingPro Tip indicating that analysts anticipate sales growth in the current year.
Despite the positive revenue trajectory, it's worth noting that Roblox is not currently profitable, with an operating income margin of -34.91% for the same period. This aligns with another InvestingPro Tip suggesting that analysts do not anticipate the company will be profitable this year.
The market seems to be pricing in future growth potential, as evidenced by Roblox trading at a high revenue valuation multiple and near its 52-week high. The stock's recent performance has been particularly strong, with a 19.08% return over the last month and a 36.87% return over the last three months.
For investors seeking a more comprehensive analysis, InvestingPro offers 14 additional tips for Roblox, providing a deeper understanding of the company's financial health and market position.
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