Zinger Key Points
- Wells Fargo rates Roblox Overweight with $49 target, highlighting advertising potential.
- Price based on 25x 2026 cash flow, boosted by Nicki Minaj collaboration and bookings growth.
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Roblox Corp RBLX stock climbed after Wells Fargo analyst Ken Gawrelski initiated coverage with an Overweight rating and a price target of $49.
The re-rating reflected the audience platform with advertising upside.
The analyst derived the price target from a 25x multiple on his 2026 free cash flow/share estimate of $1.95.
The 25x multiple is a relative 3-year CAGR of free cash flow per share of >50%.
The gaming platform continues to pique investor attention with "Queen of Rap" Nicki Minaj joining the popular gaming platform, coinciding with her new album, "Pink Friday 2," on December 8, 2023.
The company also proved its relevance during its Investor Day in November, which featured a discussion around advertising, AI, model leverage, and ~20%+ bookings growth.
Roblox's advertising will likely include a full-funnel suite of products by FY25 with revenue at higher incremental margins than the core business.
The company expects ~20%+ bookings growth through FY25-FY27 and 1-3% annual margin expansion.
Price Action: RBLX shares traded higher by 1.71% at $42.76 on the last check Wednesday.
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