On Thursday, BMO Capital Markets sustained its positive stance on Roblox Corp. (NYSE: RBLX), lifting the price target from $56.00 to $62.00 while keeping an Outperform rating on the shares. The adjustment follows Roblox's robust third-quarter performance, which surpassed expectations in terms of Bookings and Adjusted EBITDA, with increases of 10.5% and 48%, respectively.
The company's user engagement saw a notable uptick, with Daily Active Users (DAUs) and hours spent on the platform growing year-over-year by 27% and 29%. Particularly significant was the growth in older users, with those aged 13 and above now constituting 60% of the DAUs, a trend that supports the expansion of Roblox's emerging advertising business.
BMO Capital's analysis points to the evolution of Roblox's user demographics as a key factor, with the platform's ability to attract an older audience playing a crucial role in its growth strategy. The firm has adjusted its forecast for the company, increasing the Bookings estimates for fiscal years 2024 and 2025 by 3.3% and 4.7%, respectively. The revisions reflect the improving engagement trends and Roblox's effective execution of its business plans.
In conclusion, BMO Capital's revised price target represents an optimistic outlook for Roblox's continued growth and its potential to capitalize on the expanding user base and engagement levels. The firm's reiteration of the Outperform rating and increased price target underscore its expectation for Roblox's positive trajectory to persist.
In other recent news, Roblox Corporation has demonstrated strong financial growth in its third quarter of 2024. The company's revenue rose by 29% to reach $919 million, while bookings surged by 34% to $1.129 billion. Daily active users also saw a 27% growth, reaching 88.9 million, with significant expansion in Japan and India. BofA Securities and Canaccord Genuity have both responded positively to these developments, raising their price targets for Roblox to $70 and $60 respectively, while maintaining a Buy rating on the stock.
Roblox's third-quarter bookings exceeded expectations set by the Street, BofA, and the company's own guidance, growing by 34% year-over-year. The robust performance was partially attributed to the availability of PlayStation 5 and the implementation of new Search & Discovery (NASDAQ:WBD) algorithms. The company's EBITDA margin was 500 basis points above expectations, reaching 20%, with an incremental EBITDA margin of 63%.
Looking ahead, Roblox's fourth-quarter bookings and EBITDA guidance have surpassed expectations, indicating continued operational momentum. Moody's (NYSE:MCO) has upgraded Roblox's senior notes to BA1, reflecting a positive outlook on the company. These are among the recent developments for Roblox as it continues to focus on core gaming business expansion and global market expansion.
InvestingPro Insights
Roblox's recent performance and BMO Capital's optimistic outlook are further supported by real-time data from InvestingPro. The company's revenue growth remains strong, with a 29.81% increase over the last twelve months as of Q2 2024, and an even more impressive 31.26% quarterly growth. This aligns with BMO Capital's positive view on the company's expanding user base and engagement levels.
InvestingPro Tips highlight that analysts anticipate sales growth in the current year, which corroborates BMO Capital's increased Bookings estimates for fiscal years 2024 and 2025. Additionally, three analysts have revised their earnings upwards for the upcoming period, suggesting growing confidence in Roblox's financial performance.
However, investors should note that Roblox is currently trading near its 52-week high and at a high revenue valuation multiple. This could indicate that the market has already priced in much of the positive outlook discussed in the article.
For a more comprehensive analysis, InvestingPro offers 7 additional tips for Roblox, providing investors with a deeper understanding of the company's financial health and market position.
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