Ian Tuttle
Roblox (NYSE:RBLX) shares rose 2.5% in pre-market trading on Thursday as a few Wall Street analysts upgraded the video game company, noting that an inflection point is “on the horizon.”
Roth MKM analyst Eric Handler raised his rating on Roblox (RBLX) shares to buy from neutral and boosted his per-share price target to $48 from $37, stating the company should return to adjusted EBITDA growth in 2024 as it slows headcount and compensation following the release of its first-quarter results.
“As a result, we now project: adjusted EBITDA will grow 20%+ next year versus our prior flat outlook and adjusted EBITDA margin will expand rather than contract,” Handler wrote in an investor note.
Handler added he was “surprised” to see average bookings per daily active user turned positive on a year-over-year basis for the first time in six quarters, citing improvements in international monetization and continued success in growing the over 13 years old user base. Handler also said advertising testing is yielding some positive results, with the potential for further improvement in 2024 and beyond.
Benchmark analyst Mike Hickey also upgraded Roblox (RBLX) to buy citing “encouraging” key performing indicators, reemerging growth and better operation focus.
“RBLX appears to have worked through the pandemic influence and has been seemingly immune to macroeconomic pressure on consumer spend,” Hickey wrote. “We continue to see evidence for a potentially stabilizing mobile game market, which would be a compelling operational trend.”
For the period ending March 31, Roblox (RBLX) lost 44 cents per share, while bookings came in at $773.82M, up 22.6% year-over-year. Analysts were expecting a loss of 39 cents per share and $765.37M in bookings.
The company added that its average daily active users during the period rose 22% year-over-year to 66.1M, while engaged hours rose 23% from a year-ago to 14.5B.
Revenue during the period was $655.3M, up 22% year-over-year and 24% on a constant currency basis.
Analysts are overwhelmingly cautious on Roblox (RBLX). It has a HOLD rating from Seeking Alpha authors, while Wall Street analysts rate it a HOLD. Conversely, Seeking Alpha’s quant system, which consistently beats the market, rates RBLX a HOLD.