Roblox stock dove after disappointing November data. Needham analyst Bernie McTernan rates shares at Buy with a $136 price target—above its highest close.
Courtesy of Roblox
Roblox stock has pulled back about 27% from recent highs. An analyst at Needham thinks the shares of the videogame maker will bounce right back—and it doesn’t need the metaverse to do so.
Needham analyst Bernie McTernan initiated coverage of Roblox (ticker: RBLX) at Buy with a $136 price target on Friday. Roblox stock’s highest close yet, set on Nov. 19, is $134.72. On Friday, shares were up 3.8% to $98.84.
Roblox is a platform that allows users, predominantly children and teenagers, to create and interact in virtual worlds. Roblox’s in-game currency, Robux, can be bought online or in stores via gift cards. The company gets a cut of all virtual goods sold on its platform, and allows kids to make money from the games and experiences they create with Roblox’s tools.
Shares fell on Thursday after the company reported slightly disappointing monthly user and bookings figures for November.
“We believe the reason to own shares is the amount and trajectory of engagement the platform generates and the future monetization opportunities are not fully appreciated by the market,” McTernan wrote.
The company is viewed as a pioneer in the metaverse space, given it enables social interaction, gaming, and spending in a vast web of virtual worlds.
“We do not believe investors need to dream the dream of the long-term metaverse to be bullish on shares, rather there is a path for continued user and engagement growth globally and monetization should follow,” McTernan wrote. “That said, we see an enormous potential opportunity for the platform provider(s) of the metaverse.”
McTernan called the long-term evolution of the metaverse a “nice to have, not need to have” for Roblox stock to work, long-term. He sees Roblox growing daily active users on top of the gains it made during pandemic lockdowns, with engagement and monetization improving. He forecasts Roblox growing global bookings, a form of adjusted revenue, at a 25% compound annual growth rate through the end of 2025.
Write to Connor Smith at [email protected]
