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The firm raised estimates for the online game platform and game creation system business, revising “Bookings and Revenue to levels in-line with the high end of monthly metrics reports (consistent with 3Q/4Q) — $773M/$656M vs. St. $768M/$632M.”
“With hiring activity moderating and Roblox most of the way through the latest ITS investment cycle, cost growth should slow, and revenue should translate to an EBITDA beat (BTIGe $72M vs. St. $66M),” wrote the analysts, who have a Buy rating and $55 price target on the stock.
“Following the 4Q22 EBITDA surprise, investors have naturally shifted focus toward profitability. 2H23 growth and comp concerns do still come up, but that seems to be due in part to the lumpiness of the ’21/22 post-COVID stretches. Against a relatively more normal period (’19), our forecasts embed 1-400 bps of y/y growth deceleration in each quarter from 1Q23 forward.”
Overall, they stated that given the current focus on margins and growth potential, they are positive on Roblox heading into the print.
“Per data points we picked up at GDC, user affinity for personalization is stronger than we think most realize, and expansion of both the facets of avatar personalization and selection should have a positive impact on bookings. We estimate each 0.5-1.0 items purchased could add $20-40M in bookings, which would be 2-500 bps accretive to our growth, if that began in the back half of this year,” they concluded.
