Roblox Shares Dip Premarket Even As Morgan Stanley Hails It A ‘Clear Leader’ In Next-Gen Entertainment

Roblox Corp. (RBLX) stock slipped nearly 2% in Tuesday’s early premarket session despite a Wall Street firm issuing positive commentary on the immersive gaming and creation platform. Broader market weakness, as indicated by index futures, dragged by adverse geopolitical catalysts, may be pressuring the stock.

In a note released late Sunday, Morgan Stanley analysts maintained an ‘Overweight’ rating on Roblox stock and a $170 price target, a note summary posted by the Fly showed. The research firm’s price target implies roughly 35% upside from the stock’s closing price of $128.24 on Monday. Morgan Stanley’s bull-case valuation for the stock is $300.

Analysts at Morgan Stanley called Roblox a ‘clear leader” in the next-generation entertainment platforms with a path to over one billion users by 2030. The company ended its second quarter with daily active users (DAUs) of 111.8 million, with the metric growing 41% year-over-year. The analysts said they see parallels with user-generated content winners such as Alphabet’s (GOOG) (GOOGL) (GOOG) YouTube. They also pointed to Roblox’s strong position in artificial intelligence (AI). 

The stock came under selling pressure in early October when an analyst raised concerns about bookings. M Science analyst Corey Barret said in a report that bookings growth decelerated sharply in September from recent highs, dropping to a low-30% YoY percentage range, Investing.com reported. The analyst also flagged softness in core European markets. He attributed the predicament to the "rationalization of growth in more mature markets associated with back-to-school."

Second-quarter bookings climbed 51% YoY, and the company guided to third-quarter bookings of $1.59 billion to $1.64 billion, suggesting 41%-45% growth. That said, Barret noted that bookings growth in non-core markets remained strong and that mobile DAU growth accelerated sequentially across the markets in the third quarter. 

Since then, Citi raised the price target for Roblox stock to $155 from $152 and maintained a ‘Buy’ rating. Citing data from RoMonitor, Citi said third-quarter bookings and adjusted earnings before interest, taxes, depreciation, and taxes (EBITDA) will likely beat expectations. The firm also expects the company to raise its 2025 guidance. MoffettNathanson analyst Clay Griffin upgraded the stock to ‘Neutral’ from ‘Sell’ last week, citing user metrics that have exploded higher.

On Stocktwits, retail sentiment toward Roblox stock stayed ‘neutral’ as of early Tuesday, and the message volume also remained at ‘normal’ levels.

Roblox stock has gained over 122% this year. The company is scheduled to announce its quarterly results before the market opens on Oct. 30.

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