Roblox Corp (NYSE:RBLX) faces an uphill battle in the third quarter, according to analysts at Jefferies.
The firm reiterated its Buy rating for the company but docked its price target to $34 from $38.
The problem for Roblox is that it likely needs to generate 20% growth in net bookings in order to hit a positive margin inflection by the first quarter of 2024, the analysts argued in a note to clients.
Third-party data suggests it won’t, and while the analysts expressed wariness about said data, they came to the same conclusion.
“Is third-party data correct? We don't think so,” analysts wrote. “...Without access, it's difficult to assess, but our analysis and checks lead us to believe this data is materially wrong. Our analysis leaves us with confidence that net bookings growth (not including advertising) is likely to fall within the 14.5-17% y/y range for 3Q.
“However... if we are correct and net bookings growth falls within this range, it's likely not good enough to meet investor or mgmt expectations for margin expansion goals of a positive inflection by 1Q24,” they noted.
On the positive side, daily active users for Roblox seem to be in good shape, and the next quarter has potential catalysts for the company.
“DAUs (daily active users) look healthy, advertising is likely starting to ramp more materially, [PlayStation] launch is imminent, and an analyst day is scheduled for 11/15; all are potential catalysts,” the analysts wrote.
Shares of Roblox gained 0.8% Thursday to $29.82.
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
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