What's In Store For Roblox In Q3 Earnings? Analyst Sees Path For Adj. EBITDA Margin Improvement

Stifel analyst Drew E. Crum reiterated the Buy rating on Roblox Corporation RBLX with a price target of $41.

The company will report third-quarter 2023 financial results before opening the U.S. markets on Wednesday, Nov. 8, 2023. 

Crum writes that RBLX has lost nearly -20% of its market cap since reporting 2Q results in early August. 

But the analyst sees Q3 earnings and a subsequent investor day in mid-November as potential catalysts, providing the company an opportunity to address several initiatives, including a path for AEBITDA margin improvement.

Crum says the 3Q estimate is unchanged at +17% (y/y) to $824 million (in line with consensus), which reflects higher DAUs (+21% y/y; +9% q/q) against lower monetization with ABPDAU down (-3% y/y; -4% q/q).

The analyst projects hours engaged at 15.2 billion (+13% y/y; +9% q/q).

According to Sensor Tower, mobile downloads increased +23% y/y (+8% q/q), while mobile MAUs and DAUs were both up +34% y/y (+14% q/q), suggesting healthy engagement for the period, notes the analyst.

IAPs revenue rose +8% y/y (+4% q/q), lagging the analyst's bookings assumption (though several variables may have distorted this comparison).

The analyst's AEBITDA forecast for $40 million (-22% y/y) suggests a margin of 4.8% (-250 bps y/y; -10 bps q/q) which is comparable to (though slightly more pessimistic vs.) consensus at 5.4% (+50 bps q/q).

If accurate, this would represent the lowest AEBITDA margin for Roblox as a public company, but should improve going forward.

The analyst notes, RBLX is uniquely positioned at the intersection of content and social, two "viral loops" that provide a mutually reinforcing network effect that together should drive audience growth, higher engagement, and improved monetization. 

Taken together, the company can deliver double-digit bookings growth going forward, Crum adds. 

The analyst increased FY23 bookings estimates to $3.43 billion from $3.41 billion.

Price Action: RBLX shares are trading higher by 6.4% to $32.52 on the last check Tuesday.