Analysts upgrade Roblox stock amid 'expanding margins'

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Analysts upgrade Roblox stock amid 'expanding margins'
Credit: © Reuters.

In the aftermath of its recent earnings report and impressive guidance, Goldman Sachs analysts upgraded Roblox (RBLX) to Neutral from Sell, and raised their 12-month target price to $48, from $35.

“Our prior Sell rating had been based on a more negative risk/reward skew to the shares,” analysts said.

However, the bank has now adjusted its forward operating estimates and valuation framework citing outperforming business fundamentals, “increased visibility into a mixture of compounded topline 20%+ YoY performance and expanding annualized margins,” they added.

“Looking long term with a nod to the upside case, we still see Roblox as a well-positioned company in the gaming/interactive entertainment space as well as an emerging thematic player around the metaverse and creator economy themes,” analysts at the firm wrote.

RBLX closed 10.2% higher on Wednesday.

For the next 12 months, maintaining steady performance and effectively managing the platform's health will be crucial for countering potential concerns about a slowdown in growth or profit margins, Goldman noted.

Similarly, RBLX also received an upgrade from Barclays analysts, who hiked their rating on the stock to Equal Weight from Underweight. Moreover, the price target was also lifted to $46 from $26.

“The longer-term framework of 20% bookings CAGR and 20% EBITDA margin, with advertising entering the fray at some point, looks attractive,” analysts at Barclays commented.

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