Deutsche Bank has started covering Roblox (NYSE:RBLX) when buying – joining a camp of bullish analysts that has only grown larger lately that the stock fell.
Some 11 hedge analysts rate the stock as buying or strong buying, a number that has increased in recent months. That’s about enough time for the stock to have lost 70% of its value from its 52-week high, reached on November 22.
For Deutsche Bank, Roblox is the “next platformer” with “growing moats and powerful network effects”.
The company has surpassed 50 million daily active users globally, the bank says, marking a compound annual growth rate of 56% over the past three years – and although growth will slow due to pandemic comparisons this year , there are “multiple paths” to 96 million DAUs by 2025, he says.
Its strong network effects, meanwhile, should result in typical “winner takes the most” dynamics, where an early advantage matters. One of Roblox’s main competitive advantages, according to Deutsche Bank, is a “large supply base” of developers, having doubled that community in three years to around 10 million today. “More developers -> more experiences -> more users -> more revenue for developers -> more developers…” concludes the bank.
In terms of falling shares, he says many are discounting the benefits associated with a push forward on the supply side. “We believe Roblox is emerging from the pandemic structurally stronger, with more developers/creators using Roblox’s platform to release an increasing number of experiences.”
This creates an attractive opportunity to add a market leader at a discount, he says.
The bank has a price target of $60, implying a 45% upside from Thursday’s close.
Seeking Alpha contributor Star Investments recently said the company had been given a “dose of reality”, but the stock would rise over time as users, hours engaged and bookings grew. averages.