Morgan Stanley downgrades Roblox and says it’s time to sell video game stocks
Morgan Stanley says it’s time to exit Roblox after its strong December report. Analyst Matthew Cost downgraded shares of the gaming company to underweight from equal weight, saying upside from here was limited after the stock’s recent outperformance. On Tuesday, Roblox shares closed 11% higher after its December 2022 earnings report that showed estimated bookings for the month ranged from $430 million to $439 million, or 17% to 20% higher year-over-year. The gambling company calls its sales figures bookings. “Heading into 23, we had maintained a balanced view on RBLX as we believed strong holiday seasonality and easy comps into mid-23 would result in a series of monthly metrics releases that would show accelerated booking growth,” Cost wrote Thursday. “However, RBLX is now up 28% YTD after significantly stronger than expected December results and we believe the reacceleration from 1H:23 is now fully priced in with more mixed catalysts ahead,” added Cost. Roblox stock may be surging at the start of 2023, but it took a hit last year, closing 2022 down about 72%. The analyst lowered its target price to $24 from $27.50, meaning shares could fall another 32% from Wednesday’s close. Additionally, the analyst holds a $10 price target in his bear case. Shares fell more than 6% in premarket trading on Thursday. The analyst expects slower growth to set in in the second half of 2023. While Roblox expects immersive advertising to be a key growth driver in 2023, the analyst expects adoption to be too slow to support the stock. “We believe the reacceleration in 1H bookings appears to be priced in, with more mixed catalysts ahead, as we expect slower 2H growth and minimal upside from advertising in the near term,” Cost wrote. – CNBC’s Michael Bloom contributed to this report.
https://www.cnbc.com/2023/01/19/morgan-stanley-downgrades-roblox-says-its-time-to-sell-the-video-game-stock.html Morgan Stanley downgrades Roblox and says it’s time to sell video game stocks
