Roblox (RBLX) was initiated with an Overweight rating and $49 per share price target at Wells Fargo on Wednesday, with the firm noting the company's advertising upside.
The investment bank believes Roblox should be viewed as a growing audience platform with a robust economy "driven by its core microtransaction business" rather than a pure gaming platform.
"Similar to other audience platforms, we expect ads to become a significant earnings stream over time for Roblox, supported by strong user engagement," said analysts at Wells Fargo. "See meaningful upside to consensus bookings and EBITDA as we believe the ads opportunity is underappreciated by the Street, which has yet to properly capture future ad bookings into forecasts."
Wells Fargo estimates 2025 bookings at 7% above consensus, with the large untapped advertising opportunity becoming a "key driver" of Roblox's total bookings base starting in 2025.
Furthermore, the investment bank expects upside to the 100-300bps annual EBITDA margin expansion target announced during the company's recent Investor Day as the ad business starts to scale.