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Could Roblox be Worth Your Money?
Stock Analysis & Ideas

Could Roblox be Worth Your Money?

Global entertainment platform Roblox (RBLX) enables users and developers to interact and build 3D experiences and games that are playable on most connected devices. The platform boasts about 50 million global daily active users (DAUs).

Yesterday, impressed by the growth story of the company and buoyed its potential, BTIG analyst Jake Fuller initiated coverage on the stock with a Buy rating and a $98 price target.

“We’re bullish on long term DAU and developer growth, and are encouraged by recent trends vs. difficult COVID comps,” explained Fuller, referring to the surge in user growth last year as a result of COVID-19-led lockdowns. (See Analysts’ Top Stocks on TipRanks)

Fuller expects users to cross 100 million and witness bookings growth at approximately 20% CAGR in the long-term. The analyst also believes DAU to drive bookings growth in the near-term as well, and he is encouraged by the remarkable bookings performance recently against tough year-over-year comparables. International platform expansion is expected to be the primary fuel for growth over the medium to long-term.

The gaming restrictions on the young population in China will be a small hindrance to bookings from the country, but Fuller doesn’t seem to be too concerned. He believes that “Roblox can still outperform Bookings and DAU expectations without that [China restrictions] being a big contributor.”

Moreover, various activities to enhance developer and user engagement are encouraging to the analyst. The platform has more than 8 million active developers mostly between the ages of 17 and 24 years. Fuller expects to “see a steady shift in developer creations toward content that will resonate with older users that have disposable income.”

Consensus, however, is cautiously optimistic about Roblox, with a Moderate Buy rating based on 5 Buys, 1 Hold, and 1 Sell. The average Roblox price target of $91.14 indicates an upside potential of 12.7%.

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Disclosure: At the time of publication, Chandrima Sanyal did not have a position in any of the securities mentioned in this article.

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