It’s “time to respect the community” around Roblox , according to Jefferies. The firm upgraded Roblox shares to buy from hold on Friday, saying it is now confident the company will be able to maintain strong growth despite strong competition and macro pressures. “We are upgrading RBLX on a favorable narrative (top line growth w/ margin inflection & an advertising option) supported by strong net bookings expansion and underlying user metrics.,” analyst Andrew Uerkwitz wrote in a client note on Friday. “With regular rollouts of new user and creator features, we are comfortable RBLX will grow through NT competitor and macro pressures. We expect it to remain among the fastest growing internet companies earning multiple expansion, higher estimates, and investor interest,” he added. Uerkwitz raised his price target to $48 from $30, implying upside of more than 20% from Thursday’s close price. The analyst said that while he was previously concerned about the sustainability of Roblox’s daily active users and its margins, a “narrative shift” has changed his outlook on the company’s future — making it one of the best internet companies. “A review of our coverage, RBLX thesis, and model have changed our mind on the future of the platform. It’s an internet company not a gaming company: The motivation to play RBLX, the social nature of the recent new features, and the creator aspect of play combined with recent outperformance in both net bookings and user metrics vs. traditional game companies leads us to this new narrative,” said Uerkwitz. “And this new narrative is a strong one — even compared to other internet companies — Roblox is one of the fastest growing (users and net bookings) and most used services (average time spent on Roblox is better or in line with time spent on TikTok),” he continued. Roblox shares were up 2.3% on Friday before the bell. The stock has popped more than 40% in 2023. “The high level narrative is simple: Fast growing internet company with incoming margin inflection plus an advertising revenue stream call option,” Uerkwtiz said. —CNBC’s Michael Bloom contributed to this report.
