Cautious Outlook for Roblox Amidst User Decline and Questionable Growth

In a report released today, Doug Creutz from TD Cowen reiterated a Sell rating on Roblox (RBLX – Research Report), with a price target of $40.00.

Doug Creutz has given his Sell rating due to a combination of factors related to Roblox’s recent performance and market position. Although the company’s Q4 bookings were in line with expectations and its adjusted EBITDA exceeded forecasts, the decline in daily active users (DAUs) by a record number quarter-over-quarter raises concerns about user retention and growth. The improvement in average revenue per daily active user (ARPDAU) also showed signs of slowing down compared to the previous quarter.
Creutz points out that the company’s success in meeting the quarter’s estimates was significantly aided by a 20% discount on PC and gift card Robux purchases, suggesting that underlying organic growth might not be as strong. Furthermore, while there are indications of positive trends continuing into Q1, driven by holiday user acquisition, the overall market dynamics and competition raise questions about sustained growth. These elements combined lead to a cautious outlook, justifying the Sell rating.