On Monday, Deutsche Bank (ETR:DBKGn) adjusted its outlook on Roblox Corp. (NYSE:RBLX), raising the price target to $60 from the previous $45, while reiterating a Buy rating on the stock.
The revision follows Roblox's robust third-quarter performance, which surpassed expectations with $1.13 billion in bookings, marking a year-over-year increase of 34%. This figure notably exceeded both Deutsche Bank's and Wall Street's estimates by 11% and 10%, respectively.
The company's bookings were propelled by an uptick in daily active users (DAUs), improved payer conversion rates, and increased average bookings per DAU, especially among users aged 13 and older. Notable advancements in AI-driven algorithms have bolstered user engagement and dynamic pricing strategies, enhancing monetization efforts.
Roblox's DAU growth accelerated to 88.9 million, a 27% year-over-year rise and 5 points above street estimates.
Roblox also reported record-breaking engagement, with users logging 20.7 billion hours, a 29% year-over-year growth. This surge is attributed to the company's refined recommendation algorithms and an expanded offering of Live Ops events. The quarter also highlighted that 8% of gameplay hours were derived from console usage, underscoring a robust 28% year-over-year growth in non-console activity.
Looking ahead, Roblox's fourth-quarter bookings guidance stands at $1.34-$1.36 billion, representing a 20% increase year-over-year at the midpoint. This forecast is 4% higher than analyst expectations, suggesting a potential conservative stance in light of the third quarter's 11% bookings beat against the Street's predictions.
However, the fourth quarter will be compared to the prior year's PlayStation launch, with guidance assuming flat growth for console bookings.
Deutsche Bank remains optimistic about Roblox's future, noting that the growth momentum is driven by significant improvements to the platform. The creation of new viral games and the attraction of older users are fostering a vibrant ecosystem that encourages the development of content for a broader audience.
With these factors in mind, Deutsche Bank has increased its fourth-quarter 2024 and full-year 2025 bookings estimates by 3% and 6%, respectively. The new price target is based on an 8x multiple of the projected fiscal year 2025 bookings of $5.3 billion.
In other recent news, Roblox Corporation has been the subject of several analyst upgrades following a strong third-quarter performance. Macquarie raised its price target for Roblox to $58, citing a 34% increase in revenue and a 27% rise in daily active users. Needham also revised its target for Roblox to $60, highlighting a 34% growth in bookings.
BTIG lifted its price target from $51 to $56, reflecting the company's impressive third-quarter earnings report. Barclays (LON:BARC) increased its price target to $50, and BMO Capital Markets raised its target from $56 to $62, both firms recognizing the company's robust bookings growth.
These upgrades come after Roblox reported a 29% surge in revenues, reaching $919 million, and a 34% growth in bookings, hitting $1.129 billion. Moody's (NYSE:MCO) upgraded Roblox's senior notes to BA1 following these strong results.
The company's strategic initiatives, such as improved discovery, personalization, and dynamic pricing, have been key factors contributing to higher conversion rates and bookings.
InvestingPro Insights
Roblox's recent performance and Deutsche Bank's optimistic outlook are further supported by real-time data from InvestingPro. The company's revenue growth remains strong, with a 27.98% increase in the last twelve months as of Q3 2024, aligning with the robust bookings growth mentioned in the article. This growth trajectory is expected to continue, as one of the InvestingPro Tips indicates that analysts anticipate sales growth in the current year.
Despite the positive momentum, investors should note that Roblox is currently trading near its 52-week high, with a price that is 97.7% of its peak. This aligns with another InvestingPro Tip suggesting that the stock's RSI indicates it may be in overbought territory. Additionally, the company's high Price / Book multiple of 177.75 reflects the market's optimistic valuation of Roblox's future potential.
It's worth noting that while Roblox is experiencing strong growth, it is not yet profitable. The company reported an operating loss of $1,174.39 million in the last twelve months as of Q3 2024. This is consistent with an InvestingPro Tip stating that analysts do not anticipate the company to be profitable this year.
For investors seeking a more comprehensive analysis, InvestingPro offers 15 additional tips for Roblox, providing a deeper understanding of the company's financial health and market position.
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