Roblox Corp. (RBLX) Bookings Rise but Costs Rise Faster, Morgan Stanley Sees Bear Case of $15

May 27, 2022 8:43 AM EDT
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Price: $44.82 -2.78%

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    10 Buy, 8 Hold, 2 Sell

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    Up: 9 | Down: 23 | New: 34
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Morgan Stanley analyst Brian Nowak lowered the price target on Roblox Corp. (NYSE: RBLX) to $27.00 (from $32.00), cautious on top line growth in the second half ahead of product innovation/new offerings. Additionally, larger investments in developer payouts are likely to weigh on margins, while the dilutive impact of stock based compensation draws increasing investor scrutiny.

The analyst reiterated an Equal Weight rating, seeing a bear case of $15 and base case PT of $27. He stated "We noted a material increase in Developer Exchange Fees at 1Q (now 23% of bookings), which we attribute to continued spend on engagement based payouts to drive new experience creation. Given management's commentary around continued investment in the developer community (i.e. this is not an area where we will see short-term operating leverage) we now expect DevEx to remain elevated going forward, as we raise our '22 estimate by 13% and expect this line to reach 24% of bookings by '24 and 25% over the long term. With that in mind, we expect significant pressure on near term profitability as this higher level of investment (combined with our reduced bookings expectations) leads us to reduce our '23 EBITDA estimate by 25%."

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