Shares of Roblox (NYSE:RBLX) stock are in the spotlight after the company announced that it would launch 3D advertising, or “immersive ads” next year. The metaverse company has already tested out portal ads with companies like Warner Bros (NASDAQ:WBD) and Vans. By the end of 2022, Roblox plans on testing ads with further developers and companies. Chief Product Officer Manuel Bronstein stated that the ads could be similar to digital billboards. He was also “fascinated” by the results of the current ad testing program, characterizing it as a “good strategic bet.”
Roblox’s robust user network of 52 million users makes it a prime candidate to monetize on 3D ads.
RBLX Stock: Roblox to Debut 3D Ads Next Year
In tested portal ads, users can be automatically taken to Roblox’s platform when interacting with an ad. Still, Roblox must complete further testing before deciding on a set ad format. Roblox also announced several new features, such as a tool that helps users discover new features, more complex avatars, additional creator tools and improvements to chatting. The company’s revenue primarily comes from Robux, a virtual currency that users can use to purchase virtual products, such as clothing.
On the other hand, investment bank Cowen initiated coverage of RBLX stock with an “underperform” rating and a price target of $31. At current prices, that implies downside of about 30%. Analyst Doug Cretz is cautious about the potential of the metaverse, stating that it could be “at least 10 years away.” Even if it doesn’t take 10 years, Cretz notes that current technology incumbents may be “better equipped” to take advantage of the metaverse.
As a result, validation and metaverse competition has made the analyst cautious on RBLX. He adds, “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.”
Roblox has an average price target of $46.37 among 19 firms with coverage of the stock. The highest target sits at $65, while the lowest is $21. Furthermore, the last price target update, excluding Cowen, was attributable to Wolfe Research. On Aug. 16, the firm initiated coverage with a “peer perform” rating.
On the date of publication, Eddie Pan did not hold (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.