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Roblox stock could lose another 45% from here: MoffettNathanson

By:
on Oct 3, 2022
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  • MoffettNathanson says Roblox stock could crash to $19 a share.
  • Analyst Clay Griffin explains the underperform rating in a note to clients.
  • Roblox shares are already down about 60% versus the start of 2022.

Roblox Corp (NYSE: RBLX) is already down close to 60% for the year but a MoffettNathanson analyst warns there’s way more downside that’s yet to materialise.

Roblox stock could crash to $19

On Monday, Clay Griffin initiated the game company with an “underperform” rating and said the stock could tumble further to $19 – about a 45% downside from here.

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He agreed the platform was positioned to benefit from the oh-so popular “metaverse” narrative but said:

We’re just not sure Roblox’s reality will be as grand as its vision. In a market looking for less evangelism and more meat on the bone, there’s plenty of room for the market to lose confidence.

In its latest reported quarter, Roblox lost 1.9 million daily active users (sequentially), suggesting the pandemic boost may not be very sustainable. (read more)

Short interest in the Roblox stock currently stands at about 9.0%.

Roblox is yet to turn a profit

Roblox Corp, at its core, is still an “unprofitable” tech name, which, as per Griffin, makes it all the more inappropriate for the current environment. His note reads:

True profitability remains years away. So, Roblox shares have heightened sensitivity to prevailing interest rates. Given that disconnect and our skepticism of its blue-sky scenarios, the risk is skewed much more to the downside.

On September 21st, the U.S. central bank signalled another 125 to 150 basis points of rate hikes in the coming months. (source)

Last week, retail behemoth Walmart Inc picked Roblox Corp to launch two metaverse experiences.