Roblox (RBLX 0.43%) shares have been range-bound over the past year and are sitting as I write this about 21% below their 52-week high of $47.20.
However, analysts at Roth MKM are keeping the firm's price target at $55 while also keeping a buy rating on the shares. Roblox will report first-quarter earnings results on May 9, and the analysts believe the company will continue to report growth in line with recent quarters.
Is Roblox stock a buy?
Roblox is making a strong recovery following the slowdown in growth that started in 2022. Daily active users (DAU) hit a record high of 71.5 million in Q4 2023, and this sets up more revenue growth as players start spending money on virtual currency to unlock premium content.
Growth in bookings (a non-GAAP measure of revenue) accelerated to 25% year over year in Q4, partially helped by a return to growth in average bookings per daily active user. Roth MKM believes these positive trends will lead the company to meet or beat the Street's estimates for the first quarter.
The negative for Roblox right now is that the cost to put content on the platform and invest in technology is causing large operating losses on the bottom line. It reported a net loss of $325 million last quarter on $750 million of revenue.
However, management's 2024 guidance calls for improving margins. While it's uncertain when the stock might reach the $55 price target, the company's improving growth and margins sets up a timely low entry point for long-term investors.
