Roblox Will Hold Up Reasonably Well, Analysts Say While Keeping Cautious Eye On Margins And Cash Flows

Needham analyst Bernie McTernan maintained Roblox Corp RBLX with a Buy and cut the price target from $53 to $47. The price target cut reflected lower adjusted EBITDA estimates. 

Throughout this earnings period, companies exposed to mobile gaming have reported headwinds. This led to McTernan's belief that RBLX is holding up reasonably well and likely continues to be a share gainer. 

Further details on September metrics showed that COVID was not just a one-time benefit, as frequency, engagement, and monetization were all near peak levels. 

However, its strong balance sheet provides RBLX with the opportunity to take a long-term view and sacrifice near-term margins for the future benefit of the platform. 

Morgan Stanley analyst Matt Cost reiterated an Equalweight and $35 price target. Cost highlights that RBLX reported stronger than expected results for 3Q22 top line, EBITDA, and October key metrics. 

While Cost fully acknowledges that these investments could generate a strong return over the long term, they also keep him more cautious tactically, as he believes investors remain focused on margins and FCF generation to provide valuation support through a challenging macro. 

There needs to be clarity around the drivers and sustainability of the Sep and Oct reacceleration, investment in the developer community and hiring, and commentary on immersive ads.

Benchmark analyst Mike Hickey reiterated a Sell and $21 price target. RBLX delivered disappointing F3Q22 financial results, with profit missing both consensus and Benchmark estimates. 

Going into results, Hickey had reduced F3Q22 and FY22 growth estimates, as September KPIs confirmed a disappointing net bookings quarter.

KeyBanc analyst Tyler Parker reiterated Sectorweight. Roblox reported 3Q22 and October results, with October continuing the healthy growth of the past few months. 

The bookings and DAU trends encouraged him as they appeared healthy into the Holidays. 

The macro does not appear to be slowing spending down on Roblox yet, though the incremental commentary of <10% adjusted EBITDA margins in 2023 shifts his margin progression out another year.

Price Action: RBLX shares traded higher by 7.83% at $33.34 on the last check Thursday.