By Sam Boughedda
Piper Sandler analysts started shares of Roblox (NYSE:RBLX) at Overweight with a $54 price target in a note to clients on Wednesday.
The analysts described Roblox as a "unique asset" at the intersection of gaming, social, and the Metaverse.
"We see a large global user opportunity and monetization upside versus peers. Metcalfe's Law suggests rising value with users, developers, and the dollar economy all on the rise. The advertising opportunity is a catalyst in '23. Valuation is at a premium but justified in our view given the growth opportunity ahead," wrote the analysts.
In addition, the firm sees Roblox DAU growth potentially doubling in five years and a "feasible ~$400MM opportunity in '23."
"We see a relatively intuitive path to DAU's doubling in the next 5 years. Currently, DAU penetration is low (~4%) with an addressable population at ~1.4BN globally. The platform also looks under-monetized at ~$0.06 per user-hour versus peers Snap ($0.09) and YouTube ($0.12). Finally, while user time spent is high today at ~2.5 hours / DAU / day, we still see opportunity for growth from usage categories like social and streaming video, which account for 5-6 hours/day for the average teen," the analysts added.
"Advertising is the next monetization catalyst now being rolled out, and we see a feasible ~$400MM opportunity in '23. Longer term, further upside exists as ~60%+ of mobile gaming revenue is driven by ads."
Roblox shares are up over 2% on Wednesday.