Roblox Is Well Positioned To Take On Virtual World, Analyst Rates Stock Strong Buy

Raymond James analyst Andrew Marok initiated coverage on Roblox Corp RBLX at Strong Buy and a price target of $41.

The analyst sees several factors suggesting long-term growth, which includes a shift towards video gaming in young people's entertainment time budget and opportunities for expanding the user base in international markets and older (age 17-24+) cohorts.

Also Read: Roblox China Unit Faces Layoffs as Operational Challenges Mount

Moreover, Marok says a relatively early stage of on-platform economy sophistication (like advertising starting to be realized) and expansion potential into non-gaming areas like education can also drive growth prospects.

Efforts including AI-assisted localization and experience guidelines (which allows more mature content creation) can help the company expand its user reach while maintaining the experience and safety for its younger clientele, writes the analyst.

Also, the analyst expects to see margins ramping up as the company's current investment cycle nears its end.

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

Marok estimates revenue and adjusted EPS of $3.466 billion and $0.15 in FY23, $4.031 billion and $0.24 in FY24, and $4.737 billion and $0.40 in FY25.

The company will report Q3 FY23 results on November 8, 2023. 

Price Action: RBLX shares are trading higher by 1.55% at $31.03 on the last check Friday.