RBLX stock is a buy, Roth says

Ahead of the company’s third quarter earnings, Roth MKM analyst Eric Handler is feeling bullish about Roblox (Roblox Stock Quote, Chart, News, Analysts, Financials NYSE:RBLX)

Handler says that after worse than expected second quarter results, investors are understandably nervous about third quarter results. But the analyst says maybe they shouldn’t be.

“Investors are skittish heading into the 3Q earnings release on 11/8 (BMO). The concern is attributable to the weaker than anticipated 2Q results, which caused an immediate 20% decline in the shares,” the analyst noted. “However, we believe the expectations bar is now lower and sentiment is much more
cautious. As such, an in-line print could very well spark a relief rally. In addition, it is our view the company’s investor meeting will prove beneficial to the shares as management is likely to offer up its first ever financial guidance, which should give investors greater comfort in establishing guide rails for their models. Recent events also provide positive signals such as last month’s layoffs within talent acquisition, this week’s launch on the Playstation Network, and the recent advancements in voice chat related to the Speechly tuck-in acquisition.”

In a research update to clients October 13, Handler maintained his “Buy” rating and 12-month price target of $48.00 on RBLX.

The analyst thinks Roblox will generate EBITDA of $331.7-million on revenue of $3.46-billion in fiscal 2023. He expects those numbers will improve to EBITDA of $428.9-million on a topline of $4.08-billion the following year.

“We view Roblox as our top idea within our video games/interactive entertainment coverage,” the analyst added. In our view, 3Q bookings should be in line with estimates and there could be some upside with adjusted EBITDA as operating leverage begins to appear. Furthermore, the company’s investor meeting on November 15 could offer multiple positive events including guidance metrics, a deep dive into the advertising opportunity, and clarification about margin expansion.”