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Morgan Stanley Cautious on Roblox Scale and Profitability Runway

Published 09/16/2022, 11:23 AM
Updated 09/16/2022, 11:25 AM
© Reuters.  Morgan Stanley Cautious on Roblox (RBLX) Scale and Profitability Runway

By Sam Boughedda

Roblox Corp (NYSE:RBLX) shares are down more than 8% Friday following its investor day and August metrics report after the close Thursday.

Following the company's investor day, a Morgan Stanley analyst reiterated an Equal-weight rating and $32 price target on the stock.

"At the '22 Investor Day, RBLX spoke to its large immersive advertising opportunity and outlined efforts to improve monetization and engagement through investments in the platform. That said, August metrics came in below us, as we remain cautious on the scale and profitability runway from here," wrote the analyst.

"August bookings/DAUs came in ~4%/~1% below our prior estimates and hours engaged came in 5% above. While August bookings decelerated -4% m/m, below investor expectations of +/- LSD % growth m/m, the company highlighted that FX (particularly USD strength vs. EUR and GBP) resulted in a ~400bp headwind to the reported y/y bookings growth rate," added the analyst. "That said, we do note that the FX headwind remains roughly the same (i.e. ~400bps) as it has since May of this year. Finally, we note that all time high DAUs and hours engaged (59.9mn DAUs, 4.7bn hours engaged), combined with weaker than expected bookings resulted in the lowest bookings per hour of '22 YTD (~$0.05 bookings per hour)."

Meanwhile, a Needham & Company analyst reiterated a Buy rating and lowered the price target on Roblox shares to $53 from $55 per share.

The analyst cut the price target based on lower-than-expected August bookings, which caused them to reduce estimates.

"The three highlights of the investor day to us were: (1)commentary on advertising, which we see as a substantial opportunity for RBLX; (2) Product enhancements, which are spinning the developer flywheel and enabling larger teams to create on RBLX; and (3) we learned that 'All ages engaging on the platform' is happening, as over 13 of the largest and fastest growing demographic are engaged," wrote the analyst.

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