The U.S. Securities and Exchange Commission (SEC) is actively investigating Roblox (RBLX), a popular video game service used by millions of young people. Indeed, the SEC confirmed the investigation in a letter responding to a Freedom of Information Act request but declined to share further details due to the potential harm it can cause to the ongoing enforcement proceeding.
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The subject of the investigation is unclear, but Roblox has faced scrutiny in the past over child-safety concerns and allegations that it was inflating its user metrics. In fact, short-seller Hindenburg Research published a report in October that pointed out these concerns, which Roblox, unsurprisingly, denied. The company has since implemented numerous safety changes, such as not allowing children under the age of 13 to participate in social chatting games.
As a result, Roblox’s stock price fell as much as 4.8% following the news of the SEC investigation but pared losses to ultimately close down 1.25%. This added to a decline of 11% the previous day after the company reported slower-than-expected growth in daily users.
Is RBLX Stock a Buy, Sell, or Hold?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on RBLX stock based on 15 Buys, five Holds, and two Sells assigned in the past three months, as indicated by the graphic below. After a 48% rally in its share price over the past year, the average RBLX price target of $68.30 per share implies 3.05% upside potential.
