Roblox Stock Rises As Analysts Issue Positive Reports On Video Game Firm

Several investment banks on Monday initiated coverage of newly public video game firm Roblox (RBLX) with buy ratings. Roblox stock rose on the news.


San Mateo, Calif.-based Roblox went public on March 11 in a direct listing on the New York Stock Exchange. The exchange set a suggested price of $45 a share for Roblox. Roblox stock hit a record high 79.10 on March 17.

Roblox stock has formed an IPO base with a buy point of 79.20, according to IBD MarketSmith charts.

On the stock market today, Roblox stock climbed 5.1% to 70.76.

Roblox Has 32.6 Million Daily Active Users

Roblox provides a global online platform targeted to young gamers. The company’s eponymous “Roblox” game was the biggest mobile game of 2020 in the U.S., in terms of revenue, according to data provided by Sensor Tower. Roblox reported having 32.6 million daily active users at the end of 2020, up 85% from the year-earlier period.

Roblox also lets users create their own games on the platform. Developers receive 30% of the proceeds generated from a game, such as the sale of virtual outfits and avatars.

This year, Roblox expects to generate revenue of $1.44 billion to $1.52 billion, representing year-over-year growth of 56% to 64%. It expects to end 2021 with 34.6 million to 36.4 million daily active users, representing year-over-year growth of 6% to 12%.

Roblox stock is on IBD’s prestigious Leaderboard watchlist.

Roblox Stock Blurs Social Media, Gaming Line

Wall Street firms starting coverage of Roblox stock with buy ratings include BofA Securities, Goldman Sachs, Morgan Stanley and Truist Securities.

Goldman Sachs analyst Michael Ng set a 12-month price target of 81 on Roblox stock.

“The creation and monetization of user-generated content effectively allows Roblox to outsource game development costs to its creators while retaining the economic upside with a diversified portfolio of content, reducing hit-risk,” Ng said in a note to clients.

Roblox content creators include individuals and video game studios. Other businesses create Roblox content for marketing purposes such as film and TV studios like Netflix (NFLX) and Warner Bros. and music artists like Lil Nas X.

Morgan Stanley analyst Brian Nowak said Roblox blurs the line between social media and gaming in terms of user engagement. He set a price target on Roblox stock of 80.

Roblox’s core demographic is gamers under 13 years old, Truist Securities analyst Matthew Thornton said in his report to clients. That age group is a less competitive market than other gaming markets, he said.

Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.


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