Roblox Remains Painfully Expensive With Ample Room For Further Deterioration, Analyst Says

Needham analyst Bernie McTernan reiterated his Buy on Roblox Corp RBLX and raised the price target to $42 from $39.
Following a problematic November, RBLX bounced back in December and posted better-than-expected results virtually across the board, including better-than-expected DAUs, bookings, and hours of engagement.
The critical question is how much of this beat is organic versus one-time benefits like holiday gift cards and one extra weekend day.
The analyst assumes the beat was primarily organic and forecasted high teens reported bookings growth in FY'23E, relative to the 21% constant currency growth in December '22.
McTernan noted that revenue missed his expectations, although the analyst continues to believe bookings are a better metric for monetization and views revenue as more of an accounting output.
McTernan's estimates move higher in '23E and beyond, leading to the price target boost.
Benchmark analyst Mike Hickey had a Sell rating with a $21 price target.
RBLX reported Q4 net bookings that were slightly better than the consensus view but disappointed Benchmark estimates.
RBLX plans to remove forward KPI transparency, which the analyst views as a negative development.
Following the expected release of March 2023 monthly metrics in April 2023, RBLX will cease publishing monthly metrics.
The analyst believes RBLX's video game platform is vulnerable to current and emerging negative macroeconomic trends, including inflation, unemployment, and wealth reduction.
Hickey was astonished over RBLX's decision to continue elevated investment spend that should exaggerate a significantly challenging operating environment and deteriorate free cash flow.
The analyst saw continued execution risk on both revenue growth and profitability.
The analyst thinks RBLX remains painfully expensive, with meaningful room for further valuation deterioration.
Hickey believes a lack of clear vision and discipline have challenged the CEO.
Price Action: RBLX shares traded lower by 3.73% at $35.74 on the last check Wednesday.

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