Roblox (RBLX) Gains as Sales Rise 140%, Analyst Raises PT on Strong Growth and Early China Launch

May 11, 2021 7:02 AM EDT
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Price: $81.14 -2.22%

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Shares of Roblox (NYSE: RBLX) are up nearly 2% in pre-open Tuesday after the company reported its quarterly earnings for the first time since going public.

Roblox posted a $0.46 per share loss on sales of $387 million, representing a growth of 140% year-over-year. Daily active users (DAUs) jumped to 42.1 million while users spent 9.7 billion hours on the platform, up 98% YoY.

RBLX recorded $652.3 million in bookings, up 161% YoY while the average booking per daily active user was $15.48.

“Our first quarter 2021 results enabled us to continue investing aggressively in the key areas that we believe will drive long term growth and value, specifically hiring talented engineering and product professionals and growing the earnings for our developer community,” said Michael Guthrie, Chief Financial Officer of Roblox.

“We believe we must continue to innovate and so remain focused on building great technology to make progress on our key growth vectors, primarily international expansion and expanding the age demographic of our users.”

For the ongoing quarter, the company said it recorded sales between $143 million and $145 million in April, while DAUs jumped by 37% to 43.3 million compared to a year-ago period. Elsewhere, bookings came in between $242 million and $245 million, marking a growth of 60%. An average booking per DAU was recorded in a range of $5.59 and $5.66.

A strong Q1 performance prompted Morgan Stanley analyst Brian Nowak to raise the price target to $87.00 per share from $80.00 on the Overweight-rated RBLX.

“Roblox continues to add more users and engagement even as re-opening continues ...and users are spending dollars too, with April bookings up ~60% Y/Y (to ~$245mn) vs. Us Previously at 6% growth fo r2Q21. This continued user, engagement and bookings growth should give investors more confidence in the durability of RBLX's forward growth and free cash flow potential,” Nowak wrote in a note sent to clients.

Another important factor is that RBLX managed to launch in China 6-12 months earlier than Nowak anticipated.

“[Earlier] we wrote to how our bull case incorporates a contribution from China, which we think could add $600mn/$300mn of '24 annual bookings/EBITDA,assuming a late '21/early '22 launch and eventual 5% penetration of 5-24 year olds. We now believe Luobu (Roblox China)has launched as of April (~6-12 months ahead of our forecast)via its joint venture with Tencent (covered by Gary Yu). It will be important to monitor adoption here as a further step toward our bull case estimates. We continue to have no contribution from China in our base model,” the analyst adds.

Finally, Nowak highlights 5 drivers behind a premium multiple placed on RBLX:

1) A longer user growth runway;

2) Higher engagement (which leads to more monetization optionality);

3) Lower content risk than some peers;

4) Material monetization call options not in the base model (including the now-launched China and

advertising); and

5) General pragmatic approach with deceleration in the base model.

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