On Tuesday, BTIG analysts maintained a Buy rating on Roblox Corp . (NYSE:RBLX) shares.
The adjustment comes as Roblox prepares to announce its fourth-quarter earnings on February 6, 2024.
The firm's decision is based on several positive indicators, including new account growth, strong gift card purchase trends, which contribute significantly to the company's bookings, and signs of improved user engagement. These factors have led to a revision of the fourth-quarter 2024 estimates for Roblox.
The analyst's report announcing a raise to $66 from the previous price target of $56 includes a detailed analysis of the factors influencing the revised estimates, such as the tracking of gift card trends, paid experiences, and adjustments to Robux yield that may enhance the company's gross margin.
The report also provides a broader perspective on Roblox's potential for sustained growth.
BTIG continues to see Roblox as a platform capable of maintaining a healthy growth rate of over 20% in bookings, driven by ongoing improvements in personalization that enhance user engagement and monetization. This growth is expected to exhibit some volatility on a quarterly basis as the company explores new monetization opportunities, including advertising and paid experiences.
Despite the optimistic outlook and the raised price target, the firm cautions investors about the stock's high valuation, which is approximately 25 times BTIG's estimated 2026 EBITDA, and the potential for significant share price volatility from quarter to quarter.
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