Roblox Target Cut at Morgan Stanley, Expect Pressure on Near-Term Profitability

By Sam Boughedda

Financial Eye — Roblox Corp’s (NYSE:) price target was cut to $27 from $32 by Morgan Stanley analyst Brian Nowak on Friday.

The analyst, who maintained an Equal Weight rating on the stock, said while the first quarter was “better than feared,” they are cautious on revenue growth in the second half of the year and 2023.

In addition, bigger investments in developer payouts will likely weigh on margins.

“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,” wrote Nowak.

The analyst expects “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%.”

Roblox stock is trading 4% higher Friday. However, it is down almost 70% in 2022.