Investing.com -- Shares of Roblox Corporation (NYSE:RBLX) jumped 3.6% in pre-market trading on Monday following Morgan Stanley’s decision to upgrade the stock to "overweight" from an "equal-weight" rating.
The brokerage also revised its price target for Roblox, setting a new benchmark of $65, up from its prior target of $38.
This outlook reflects Morgan Stanley’s confidence in Roblox’s recent operational momentum and expanding market potential, particularly as the platform has succeeded in both growing its user base and achieving substantial gains across various demographics and platforms.
Analysts at Morgan Stanley cited strong third-quarter results, with the company reporting 28% year-over-year growth in bookings outside the console segment, outpacing broader market growth and marking its highest increase since the peak of COVID-19 in 2021.
Roblox’s expansion to the PlayStation platform in October played a pivotal role in this growth, showcasing the company’s strategy to capture new users through cross-platform accessibility.
Even as console bookings rose significantly, the non-console segment still dominated, accounting for over 90% of bookings—a testament to Roblox’s broad appeal across devices.
The platform’s success in attracting older audiences has further bolstered Morgan Stanley’s positive outlook.
Currently, 41% of Roblox’s daily active users are over 17 years old, indicating that the company’s efforts to expand its content offerings and appeal to a more diverse age demographic are yielding results.
Popular experiences on the platform, such as NFL Universe Football and Rivals, a first-person shooter, underscore this diverse appeal, blending entertainment genres to engage a wider audience.
Morgan Stanley analysts flagged that Roblox’s potential to drive incremental revenue through advertising and e-commerce could contribute to significant revenue growth in the longer term.
These avenues, while still modest in the base forecast, are considered high-margin opportunities that could boost the company’s bottom line.
The firm’s report stated that if Roblox’s advertising revenue were to expand beyond current conservative estimates, the stock could potentially see further appreciation, possibly reaching the $110 mark under Morgan Stanley’s bull-case scenario.