On Wednesday, BMO Capital maintained its Outperform rating on Roblox Corporation (NYSE:RBLX) shares with a steady price target of $56.00. The firm's stance remains positive despite recent concerns over child safety on the online platform. The analyst at BMO Capital believes these issues are common across various online platforms and are not specific to Roblox.
The third-quarter earnings for 2024 are anticipated to display ongoing strong engagement trends, which are keenly observed by the analyst. Moreover, there is an interest in signs indicating that Roblox's advertising business is growing. The analyst suggests that the recent decline in Roblox's stock price, prompted by a short report, presents a buying opportunity for investors.
BMO Capital's price target is based on 7.3 times the firm's fiscal year 2025 Bookings estimate. The analyst's projections for the company remain unchanged, implying confidence in the company's performance and potential growth.
Roblox, known for its gaming platform that allows users to create and play games, has been under scrutiny for how it handles child safety. However, the firm's focus is on the company's business metrics and potential rather than these concerns. The analyst expects the company to continue its positive trajectory in terms of user engagement and revenue generation from its advertising segment.
The company's stock has reacted to market movements following the short report, as is common with publicly traded companies. However, BMO Capital's reiteration of its price target suggests a belief in the resilience and future prospects of Roblox Corporation.
In other recent news, Roblox Corp. experienced a variety of developments. Piper Sandler raised the price target for Roblox stock based on strong teen survey data, resulting in revised estimates for user growth and earnings.
Wells Fargo also updated its outlook on Roblox, projecting a 27.5% year-on-year increase in total bookings for the third quarter and a 22-25% growth for the fourth quarter. The firm anticipates that Roblox's full-year bookings guidance will adjust to a range of $4,330 million to $4,355 million.
In a contrasting move, Hindenburg Research took a short position on Roblox, questioning the accuracy of the company's user metrics. This development indicates skepticism about Roblox's reported growth and potential financial performance.
Moreover, Roblox announced the impending departure of its CFO, Michael Guthrie, who will transition to an advisory role. The search for his successor is currently underway.
Lastly, Roblox is set to relocate its headquarters within San Mateo, California, as of January 1, 2025. This change will not alter the company's contact number, and all future correspondence should be directed to the new address. These recent developments highlight the ongoing changes and expectations surrounding Roblox Corp.
InvestingPro Insights
Roblox Corporation's financial landscape, as revealed by InvestingPro data, presents a mixed picture that aligns with BMO Capital's analysis. The company's revenue growth remains robust, with a 29.81% increase over the last twelve months as of Q2 2024, and an even stronger 31.26% growth in the most recent quarter. This data supports BMO Capital's expectation of "ongoing strong engagement trends" in the upcoming Q3 earnings report.
However, profitability remains a challenge for Roblox. An InvestingPro Tip highlights that the company is not profitable over the last twelve months, with a negative operating income of $1.19 billion. This aligns with another tip indicating that analysts do not anticipate the company will be profitable this year. Despite these challenges, Roblox holds more cash than debt on its balance sheet, potentially providing financial flexibility as it navigates growth.
The stock's volatility, mentioned in an InvestingPro Tip, is evident in its recent price movements. While the 6-month return shows an 11.24% gain, the 1-month return indicates an 11.85% decline, possibly reflecting the impact of the short report mentioned in the article.
For investors considering BMO Capital's view of a buying opportunity, it's worth noting that Roblox is trading at a high revenue valuation multiple, according to another InvestingPro Tip. This suggests that market expectations for future growth remain high, despite current profitability challenges.
InvestingPro offers additional insights, with 5 more tips available for Roblox, providing a more comprehensive view for potential investors.
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