Here’s what Wall St. experts are saying about Roblox ahead of earnings

Roblox (RBLX) is expected to announce third quarter results on Wednesday, November 8, before market opens, with a conference call scheduled for 8:30 am EDT. What to watch for:

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TOP IDEA IN VIDEO GAMES/INTERACTIVE ENTERTAINMENT: Roth MKM keeps a Buy rating and $48 price target on Roblox heading into its Q3 earnings, calling the stock the firm’s Top Idea in video games/interactive entertainment. Roblox’s Q3 bookings should be in line with estimates and there could be some upside with adjusted EBITDA as operating leverage begins to appear, the firm tells investors in a research note. Furthermore, the company’s investor meeting on November 15 could offer multiple positive events including guidance metrics, a deep dive into the advertising opportunity, and clarification about margin expansion, Roth added.

PATH TO UPSIDE: Late last month, Truist upgraded Roblox to Buy from Hold with a price target of $37, up from $35. The firm sees a path to 20% upside to consensus 2025 adjusted EBITDA estimates, driven by the core business plus immersive advertising, new platforms and the company’s transition away from engagement-based developer subsidies. Further, Truist believes Roblox’s upcoming investor day is an opportunity to “shine a light on some of these and their financial ramifications.”

ENCOURAGING FACTORS: Back on October 26, Raymond James initiated coverage of Roblox with a Strong Buy rating and $41 price target. The firm sees “a number of encouraging factors” positioning Roblox for long-term growth and sees an attractive entry point following Q2 results. Its positive view is based on long term shifts toward video gaming in young people’s entertainment time budget, “strong opportunities” for Roblox to grow its user base in international markets and older users, expansion potential into non-gaming areas like education and the ability to leverage generative AI to make the platform more attractive, Raymond tells investors.

‘TRICKY’ SETUP: Early last month, Jefferies lowered the firm’s price target on Roblox to $34 from $38, while keeping a Buy rating on the shares. The current setup into the quarter “appears to be a tricky one,” Jefferies told investors at the time. Current third-party data and the firm’s analysis fall short of the 20% net bookings growth required to see a positive margin inflection by Q1 2024, Jefferies says. On the other hand, potential catalysts include DAUs looking healthy, advertising ramping up, imminent PS launch, and an analyst day which is scheduled for November 15.