On Thursday, Citi reaffirmed its positive stance on shares of Roblox Corporation (NYSE:RBLX), maintaining a Buy rating and a $53.00 price target for the company's shares. The endorsement followed Roblox's third-quarter financial results, which surpassed market expectations.
Roblox's third-quarter bookings, average bookings per daily active user (ARBDAU), and daily active users (DAUs) all exceeded consensus estimates. The company reported an adjusted EBITDA of $223 million for the quarter, significantly outperforming the consensus of $151 million as aggregated by Visible Alpha.
Roblox's updated financial guidance for the year 2024 indicates a more optimistic outlook than previously anticipated. The company now estimates its bookings to fall between $4.343 billion and $4.368 billion, an increase from the former range of $4.18 billion to $4.23 billion. This new forecast also stands higher than the market consensus, which was set at $4.231 billion.
In addition to the bookings forecast, Roblox has also revised its adjusted EBITDA expectations for 2024. The new guidance suggests an adjusted EBITDA of $756 million to $776 million, up from the earlier projection of $640 million to $680 million. This adjustment reflects the company's stronger-than-anticipated performance and sets a higher bar for the coming year's profitability.
Citi's analysis indicates that the robust third-quarter results and the enhanced financial outlook for 2024 are likely to be met with a positive response from investors. The firm anticipates that the market will react favorably to the news, potentially leading to an uptick in Roblox's share value on the day of the announcement.
In other recent news, Roblox Corp. has been the subject of various significant developments. The online gaming platform's revenue growth is expected to surpass the industry's average over the next three years, according to Wedbush.
The firm's optimism is based on factors such as continuous traffic growth, advertising expansion, and potential recurring revenues through season passes. Furthermore, changes to the developer pay structure are anticipated to incentivize content creators and enhance platform offerings.
JPMorgan (NYSE:JPM) adjusted its financial outlook for Roblox, raising the price target to $51.00 due to expected strong third-quarter performance. Bookings and adjusted EBITDA are projected to exceed management's guidance, with daily active users tracking above consensus.
BMO (TSX:BMO) Capital maintained its Outperform rating on Roblox shares, indicating positive engagement trends. Wells Fargo (NYSE:WFC) also updated its outlook on Roblox, projecting a 27.5% year-on-year increase in total bookings for the third quarter.
Piper Sandler increased the price target for Roblox shares following the release of new Teen Survey data, leading to revised estimates for Roblox's user growth and earnings. Wells Fargo raised its price target for Roblox, expecting a 27.5% year-over-year increase in total bookings for the third quarter.
Despite these positive developments, Hindenburg Research has taken a short position on Roblox, raising questions about the company's user metrics. Lastly, Roblox announced the impending departure of its CFO, Michael Guthrie, and plans to relocate its headquarters within San Mateo, California, starting January 1, 2025.
InvestingPro Insights
Roblox's strong third-quarter performance and optimistic 2024 outlook are further supported by real-time data from InvestingPro. The company's market capitalization stands at $32.42 billion, reflecting investor confidence in its growth trajectory. Roblox's revenue growth remains impressive, with a 29.81% increase over the last twelve months and a 31.26% quarterly growth in Q2 2024.
InvestingPro Tips highlight that analysts anticipate sales growth in the current year, aligning with Roblox's upgraded bookings forecast. Moreover, three analysts have revised their earnings upwards for the upcoming period, suggesting growing optimism about the company's financial performance.
Despite these positive indicators, it's worth noting that Roblox is not currently profitable, with a negative P/E ratio of -25.96. The company also faces challenges with weak gross profit margins, as indicated by another InvestingPro Tip. However, Roblox holds more cash than debt on its balance sheet, providing financial flexibility as it pursues growth.
For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips for Roblox, providing deeper insights into the company's financial health and market position.
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