Roblox Corporation’s fourth-quarter results which beat on revenue and earnings were “as good as it gets, potentially,” according to analysts at Wedbush Securities.
As such, the analysts have raised their 12-month price target on the stock from US$32 to US$37 and maintained their ‘Neutral’ rating. Roblox shares had added 26.4% at the market close on Wednesday, trading at US$45.08.
“Our 12-month price target of $37 per share reflects an EV/bookings multiple of roughly 6x applied to our FY24 bookings estimate of $3,700 million,” the analysts wrote in a note.
READ: Roblox stock pops as 4Q booking revenues blow past expectations
Roblox’s bookings during 4Q were modestly above the analysts’ estimate of $891 million at $899 million, while adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) was a much bigger surprise at $183 million, above Wedbush’s estimate of $88 million and the consensus expectation of $104 million.
The analysts highlighted that Roblox’s profit beat could be indicative of gifting’s impact. They also noted, perhaps more tellingly, that developer exchange fees of $182.1 million represented roughly 20.2% of the bookings figure, down from 21.6% in 3Q/22.
“Given that there were not any material changes to the fee structure in the quarter, we were surprised that more remuneration did not flow to the creator base, although management described it as a timing issue,” they wrote.
“This supports our gifting theory, with the gift cards that were redeemed strengthening bookings but not translating into spending at a similar level, driving bookings upside and largely explaining the developer exchange fee shortfall.”
The analysts wrote that they believe that the company’s supporters will expect sustained top-line growth comfortably in the double digits percentage-wise.
“As long as bookings continue to beat whispers and profits live up to the hype the shares should work. We expect the shares to come under pressure should Roblox not meet key metrics expectations,” they concluded.
Contact the author at emily.jarvie@proactiveinvestors.com
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