Some companies saw exceptional growth at the height of the pandemic and those focused on online gaming were among the beneficiaries. Similar to other segments which have suffered since the economy’s reopening, the growth rate has slowed down since.
This was evident in the latest quarterly report of Roblox (RBLX). Investors reacted badly as the online gaming platform missed both on the top-and bottom-line in Q4, and sent shares down about 26% in the subsequent session.
EPS of -$0.25 missed the Street’s call of -$0.12, while Q4 bookings increased by 20% year-over-year to $770 million, yet the figure came in $2 million shy of the consensus estimate.
The problem for Roblox is that on top of the disappointing performance, the near-term outlook doesn’t hold much promise either.
For Stifel analyst Drew E. Crum, the key takeaway from the update is the fact January 2022 bookings “experienced a deceleration relative to past months,” and increased by only 2%-3% year-over-year vs. the October/November/December rates of +15%, +23%, and +21%, respectively.
Additionally, given the company suggested YoY booking comps “should improve starting in the May-June timeframe”, Crum wonders “what this suggests for February-April.”
Crum thinks the anticipated slowdown is due to “tough comps” in countries such as the U.S. and the U.K. which are responsible for most of the monetization on Roblox, while “reopening headwinds” have also played their part.
Nevertheless, the 5-star analyst remains on board, keeping a Buy rating and $110 price target. This figure implies ~104% upside potential from current levels. (To watch Crum’s track record, click here)
While Needham’s Bernie McTernan also thinks investors will be keen to see bookings accelerate again, he thinks the company’s long-term strategy should work in its favor eventually.
“RBLX is taking a wait and see approach to more directly monetize brand spend on their platform, opting for allowing brands to experiment in an environment with less friction which down the road will allow for a greater monetization opportunity from their massive engagement (41B hours of engagement on the platform in ’21),” the analyst said. “While news flow has accelerated on brands partnering on Roblox, we believe this opportunity is still at just the tip of the iceberg.”
McTernan also stays positive, reiterating a Buy while his price target is the Street’s most optimistic one; Investors are looking at returns of 152%, should his $136 objective be met in the year ahead. (To watch McTernan’s track record, click here)
And what about the rest of the Street? With an additional 5 Buys, 2 Holds and 1 Sell, the stock has a Moderate Buy consensus rating. Going by the $94.56 average target, shares are expected to change hands for ~76% premium 12 months down the line. (See Roblox stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
