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Investing.com -- Raymond James downgraded Roblox shares to Outperform from Strong Buy on Wednesday, citing a sharp run-up in the stock and rising expectations that create a “very high bar” heading into second-quarter earnings.
While remaining constructive, the firm’s analysts acknowledged the risks around Roblox’s viral hit Grow A Garden, which has helped drive a 74% rally in the share price since the day after first-quarter results.
“The rapid rise over the course of 2Q and the expectations increase that comes with it drives us to take a slight step back to Outperform,” the team wrote.
Despite the downgrade, Raymond (NSE:RYMD) James continues to see “merit in the bull case.”
Analysts highlighted several positive signs, including that Grow A Garden is “bringing in new users,” is “not the only new experience gaining traction,” and that user growth and retention metrics are improving across the platform.
“Taken together, while Grow A Garden is certainly helping matters, [it shows] that the platform can be in good shape even if it declines,” they said.
However, the firm also flagged concerns about the durability of viral hits and the risk of disappointment when expectations are high.
“The rate of estimate increases suggests that even an incredibly strong number will only be rewarded modestly, while any meaningful shortfall could be punished severely,” the note warned.
Raymond James raised its price target for the stock to $130 from $81, based on 13.5x its 2026 EV/bookings estimate, which it says reflects tangible growth rather than “metaverse-driven” hype.
Despite the valuation reset, analysts expect a “more measured advance going forward, but an advance nonetheless.”