Be careful with Roblox stock, Roth says

Roth analyst Eric Handler believes the upcoming Q4 results for Roblox (Roblox Stock Quote, Chart, News, Analysts, Financials NYSE:RBLX) will be good, but he worries that the market has already priced that in.

In a research update to clients January 27, Handler maintained his “Neutral” rating and raised his price target on RBLX from $54.00 to $70.00.

The analyst says this is a case of a very good company that is nearing or at full valuation.

“We believe Roblox will report better-than-expected 4Q results, though the shares appear to be pricing in this view,” he wrote. “Ongoing platform expansion should allow Roblox to sustain 20% bookings growth in 2025 along with additional margin expansion. However, at 8x our 2025E bookings (40x EBITDA), we see the shares as being priced for perfection. Further multiple expansion will likely depend on the development of additional revenue streams (advertising, real world e-commerce). Raising PT from $54 to $70 (8.5x 2025E bookings).”

The analyst thinks the company will post EBITDA of $789.5-million on revenue of $4.41-billion in fiscal 2024. In fiscal 2025, he expects EBITDA of $1.06-billion on a topline of $5.3-billion.

Handler says there is one order of business that could be a surprise positive in 2025.

“A deal with Nintendo (the lone absent console for Roblox) remains elusive but is a goal for the platform,” he said. “There is some precedent with UGC platforms on the Switch, including a modified version of Minecraft and the launch of Rec Room this past November. It is hoped the release of the Nintendo Switch 2 (likely this summer) could create an opportunity for an agreement between Nintendo and Roblox.”