Should I buy Roblox shares after positive view from Morgan Stanley?

By: Stanko Iliev
Stanko Iliev
Stanko dedicates himself to providing investors with relevant information they can use to make investment decisions. He loves the… read more.
on Nov 30, 2021
  • Roblox reported strong Q3 results
  • Morgan Stanley has a positive view of Roblox
  • RBLX shares remain in a bull market

Roblox Corporation (NYSE: RBLX) shares have advanced from $83 above $140 since the beginning of November 2021, and the current price stands at $126.

Morgan Stanley upgraded Roblox shares after a strong earnings report, and according to Brian Nowak, an analyst from Morgan Stanley, the risk-reward ratio remains positive.

Morgan Stanley has a positive view of Roblox

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Roblox Corporation is an American video game developer that started trading on the New York Stock Exchange on March 10, 2021.

Roblox reported financial results for the third fiscal quarter on November 08; total revenue has increased by 102.2% Y/Y to $509.3 million, slightly below expectations, while the GAAP earnings per share were -$0.13 (beats by $0.01).

Roblox’s business continues to perform well, and the company’s momentum during the second quarter continued through the third fiscal quarter.

Through the third quarter, volume trends steadily improved each month, despite the economy reopening from the pandemic, and the company’s management expects another EPS beat in Q4.

Average daily active users (DAUs) during the third quarter were 47.3 million, representing an increase of 31% year over year.

Roblox Corporation has significant potential for international market expansion, especially in China, and it is important to say that the company currently generates more than 85% of its revenue from the US, Canada, and Europe.

Roblox earns most of its money by selling its virtual currency to platform users, but it plans to monetize its existing user base to a greater extent in the future.

Morgan Stanley upgraded Roblox shares after a strong earnings report, and according to Brian Nowak, an analyst from Morgan Stanley, the risk-reward ratio remains positive.

Roblox continues to grow its user base, engagement, and monetization while the company’s management raised sales estimates for the coming three years. Brian Nowak added:

A multiple of 20x leads Morgan Stanley to a Wall Street-high target of $150, implying nearly 20% further upside. In its bull case, if it monetizes at $0.02/hour incrementally in 2023, Roblox could rise to $230, or 84% higher than its current price.

RBLX shares remain in a bull market

According to rules of technical analysis, Roblox shares remain in a bull market, and if the price jumps above $135, the next target could be around $140 resistance.

Data source: tradingview.com

Despite the current correction, there is no risk of the trend reversal; for now, still, if the price falls below $120 support, it would be a “sell” signal.

Summary

Roblox continues to improve its position in the market, and the company reported strong third-quarter results this month. Morgan Stanley upgraded Roblox shares after a strong earnings report, and according to Brian Nowak, an analyst from Morgan Stanley, the risk-reward ratio remains positive.

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