Platform’s User Growth Sets Roblox Stock Up for a Rebound

  • Two Wall street analysts have issued price-target reductions on Roblox (RBLX) stock.
  • Nevertheless, there's positive data that weighs in favor of a long position in Roblox.
  • Investors should conduct their due diligence and think about holding a small stake in Roblox shares.
RBLX stock - Platform’s User Growth Sets Roblox Stock Up for a Rebound

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California-headquartered Roblox (NYSE:RBLX) provides gamers with an immersive and interactive platform. Recent data shows that Roblox is improving in a number of key metrics, so investors can buy and hold a few shares of RBLX stock for the long term.

It’s not necessarily easy to buy a stock when there are notable analysts slashing their price targets on that stock. Doing this requires an independent mind and a willingness to conduct your own research on the company.

In the case of Roblox, not everyone is bullish on the company and its stock right now. That’s fine, though, as Roblox is making strides in expanding its user base and, just as importantly, keeping those users engaged.

RBLX Roblox $36.47

What’s Happening with RBLX Stock?

Believe it or not, RBLX stock once traded at $141.60 during the past 12 months. More recently, the stock drifted below the $30 level.

It’s funny how folks on Wall Street always seem to pile on a company after its shares have lost vale. Indeed, at least two analysts have slashed their price targets on Roblox.

First, Morgan Stanley analyst Brian Nowak cut his price target on RBLX stock from $32 to $27. Evidently, Nowak cited “reduced bookings expectations” along with concerns that “continued investment in the developer community” would exert “significant pressure” on Roblox’s near-term profitability.

Meanwhile, Goldman Sachs analyst Eric Sheridan reduced his price target on Roblox shares from $39 to $28. Apparently, Sheridan has “heightened levels of concern around tough comps [i.e., year-over-year comparisons] ahead (relative to the rest of the group).”

Delivering the Innovation Road Map

Those points are all duly noted. Still, investors don’t need to worry that Roblox’s challenges are dragging the company down.

First of all, Roblox reported year-over-year revenue growth of 30% to 32% during 2022’s first quarter. Also during that time frame, Roblox recorded 53.1 million daily active users (DAUs), up 23% year over year.

Were those users really engaged, though? The answer is definitely yes, as Roblox posted 3.8 billion hours engaged for Q1 2022, up 18% on a year-over-year basis.

In the wake of those outstanding stats, CEO David Baszucki proclaimed that Roblox “remained focused on delivering our innovation roadmap to unlock the full potential of the Roblox platform and drive long-term returns for investors.”

To further drive Baszucki’s point home, Roblox just released some highly encouraging metrics for May 2022. During that month, Roblox’s revenue was estimated to be between $194 million and $197 million, representing a year-over-year increase of 28% to 30%. Along with that, Roblox counted 50.4 million DAUs, up 17% year over year, as well as 3.6 billion hours engaged, marking a 10% year-over-year improvement.

What You Can Do Now

The objections raised by the aforementioned analysts are worth noting. Nevertheless, investors must make their own decisions based on the hard facts.

Roblox, as the data demonstrates, is growing its user base and those users are staying engaged on the platform. This should hopefully lead to improvements in the company’s top and bottom lines in the coming quarters. Therefore, traders can consider taking a small position in RBLX stock as a speculative buy-and-hold investment.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.


Article printed from InvestorPlace Media, https://investorplace.com/2022/06/platforms-user-growth-sets-rblx-stock-up-for-a-rebound/.

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