By Senad Karaahmetovic
Shares of Roblox Corp (NYSE:RBLX) are down over 1.5% in early Monday trading after a Cowen analyst initiated research coverage with an Underperform rating.
The analyst sees “high validation” as a key factor in why he started at Underperform. Moreover, he is cautious about the overall metaverse story, which may be “at least 10 years away.” Even if this timeline is somewhat shortened, he argues that Roblox is not “better equipped to take advantage of it than many other existing companies.”
“Current tech incumbents and content owners are very aware of the potential power of the metaverse, and therefore Roblox is likely to face extremely determined competition,” the analyst said in an initiation note.
These two factors - validation and metaverse competition - have forced the analyst to urge investors to be cautious on Roblox despite the business having “some attractive characteristics.”
“We believe current valuation far too aggressively factors in a metaverse future that is likely still far away and may arrive in a fashion that leaves Roblox as just one of many players,” reiterated the analyst.
The $31 per share price target reflects a downside risk of over 30% compared to Friday’s closing price.