JPMorgan has made an adjustment to the financial outlook for Roblox Corp. (NYSE: RBLX), increasing the price target to $51.00 from the previous $50.00, while keeping an Overweight rating on the shares.
The adjustment comes as a result of anticipated strong performance in the third quarter, with bookings and adjusted EBITDA expected to slightly exceed management's guidance.
Roblox's daily active users (DAUs) are reportedly tracking above consensus, according to Sensor Tower data, indicating robust engagement with the platform.
This positive trend, along with third-party data, suggests a potential upside in third-quarter bookings. JPMorgan has revised its third-quarter bookings estimate to $1,027 million, a 22% year-over-year growth and above the company's guidance range of $1,000-1,025 million.
The firm also increased its estimate for third-quarter covenant adjusted EBITDA to $156 million, surpassing the guided range of $135-155 million.
Despite the optimistic revision for the third quarter, JPMorgan has decided to maintain its fourth-quarter bookings estimate at $1,319 million, reflecting a 17% year-over-year increase. The outlook takes into account the challenge of comparing against the previous year's PlayStation collaboration and a recent slowdown in third-party data.
However, the positive adjustments for the third quarter have led to an increase in the 2024 bookings forecast to $4,225 million, which is at the upper end of management's guidance of $4,180-4,230 million.
In other recent news, Roblox Corporation has been the subject of various developments. BMO Capital maintained its Outperform rating on Roblox shares, citing strong engagement trends. Piper Sandler raised the price target for Roblox based on strong teen survey data, while Wells Fargo projected a 27.5% year-on-year increase in total bookings for the third quarter.
However, Hindenburg Research took a short position on Roblox, raising questions about the company's user metrics. On the management front, Roblox announced the impending departure of its CFO, Michael Guthrie, who will transition to an advisory role.
Lastly, Roblox is set to relocate its headquarters within San Mateo, California, starting January 1, 2025.
InvestingPro Insights
To complement JPMorgan's optimistic outlook on Roblox Corp. (NYSE: RBLX), recent data from InvestingPro provides additional context for investors. The company's market capitalization stands at $26.09 billion, reflecting its significant presence in the gaming industry. Roblox's revenue growth remains robust, with a 29.81% increase over the last twelve months as of Q2 2024, and an even stronger 31.26% growth in the most recent quarter. This aligns with JPMorgan's expectations of strong performance and bookings growth.
InvestingPro Tips highlight that analysts anticipate sales growth in the current year, supporting JPMorgan's positive revision of bookings estimates. Additionally, three analysts have revised their earnings upwards for the upcoming period, which could indicate growing confidence in Roblox's financial trajectory.
However, investors should note that Roblox currently holds a high Price / Book multiple of 214.7, suggesting the stock may be priced at a premium relative to its book value. This valuation metric, along with the company's lack of profitability over the last twelve months, underscores the importance of future growth and profitability improvements to justify its current market valuation.
For those seeking a more comprehensive analysis, InvestingPro offers additional tips and insights, with 7 more tips available for Roblox on the platform.
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