Roblox, the popular video-game platform, experienced a surge in its shares on Friday following backing from Wall Street ahead of its earnings report. Analyst Matthew Thornton from Truist Securities upgraded Roblox (RBLX) from Hold to Buy and increased the price target to $37 from $35.
Strong Growth Potential
Thornton believes that Roblox has the potential to surpass estimates and achieve adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) that are 20% higher than projected for 2025. He attributes this growth to various factors, including the core business, immersive advertising, and new platforms.
Shares of Roblox saw a 4.3% increase in premarket trading, reaching $31.87.
Favorable Outlook and Promising Future
Other analysts at Raymond James are also optimistic about Roblox's prospects. They initiated coverage with a Strong Buy rating and set a price target of $41. In their report, they highlighted the numerous opportunities for long-term growth and emphasized the role of artificial intelligence (AI).
According to the analysts, Roblox is in an advantageous position due to its software development platform, which heavily relies on creative inputs to generate content. They believe the company can benefit from Generative AI.
Upcoming Events and Expectations
Roblox is set to announce its third-quarter results on November 8 and will host an investor day on November 15. Thornton stated that third-quarter estimates are reasonable. While the company does not provide guidance, he anticipates that the fourth quarter will benefit from normal seasonality, as well as increased advertising and the recent launch on PlayStation.
Analysts, overall, hold a bullish view on Roblox, with 66% of them rating it as a Buy, according to FactSet data.