Wedbush reiterates Outperform rating on Roblox stock amid growth potential

Investing.com - Wedbush maintained its Outperform rating and $165.00 price target on Roblox Corp. (NYSE:RBLX) on Monday, citing the company as "the most compelling growth opportunity in the video game sector." Trading at $117.52 with a market capitalization of $81.6 billion, Roblox has demonstrated strong momentum with a 166% return over the past year, according to InvestingPro data.

The research firm highlighted Roblox’s swift response to child safety concerns, which it believes should ease investor worries. Wedbush also pointed to the company’s recent hit games creating a "flywheel effect" that drives platform growth, alongside developer incentives, infrastructure improvements, and AI-driven discovery features. This growth strategy appears to be working, with InvestingPro data showing impressive revenue growth of 27.4% in the last twelve months.

Roblox’s expansion into new genres and older demographics is increasing potential advertising inventory, while pricing optimization across games and regions is improving revenue streams, according to Wedbush’s analysis.

The firm acknowledged that Roblox shares may face "ongoing volatility" when new criticism or legal actions surface but emphasized the company’s track record of responding quickly with meaningful actions to create a safe environment across age groups.

Wedbush’s $165 price target reflects approximately 50 times enterprise value to EBITDA multiple on its fiscal year 2027 EBITDA estimate, with the firm noting that Roblox’s Q3 guidance for 41-45% year-over-year bookings growth "underscores the flywheel effect" already visible this quarter. While the stock shows strong momentum, InvestingPro analysis suggests the stock is currently trading above its Fair Value. Investors can access detailed valuation metrics and 12 additional ProTips with an InvestingPro subscription.

In other recent news, Roblox Corp . has been upgraded to an investment-grade rating of ’BBB-’ by S&P Global Ratings, reflecting the company’s strong user growth and financial performance. The upgrade from ’BB+’ highlights improvements in Roblox’s user base, engagement, bookings, and free operating cash flow, with gross bookings reaching $5.1 billion on a trailing-12-month basis, marking a 34% increase from the previous year. Meanwhile, TD Cowen has raised its price target for Roblox to $77 from $54, although it maintains a Sell rating, citing shifts in engagement dynamics that resemble social media platforms. Oppenheimer continues to hold an Outperform rating on Roblox with a price target of $158, despite acknowledging ongoing platform abuse concerns. These concerns are further underscored by a lawsuit filed by Louisiana Attorney General Liz Murrill, alleging Roblox’s failure to protect children from online predators and the distribution of harmful material. The legal action brings attention to the challenges of managing content and user behavior on large-scale platforms like Roblox.

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