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Shares of Roblox (NYSE:RBLX) are down 4% in pre-open Tuesday trading after Barclays analysts initiated research coverage at Underweight. The price target of $20 per share implies a downside risk of over 40% compared to yesterday’s closing price of $35.40.
This marks the third new Underperform/Underweight rating that RBLX stock earned in the last 30 days. MoffettNathanson and Cowen analysts previously initiated coverage with a Sell-equivalent rating.
For Barclays analysts, Roblox shares are overvalued as they trade at 5x FY24e bookings and 41x FY24e EBITDA, which is “more than two turns above the revenue multiples of its social media peers.” Moreover, they share other analysts’ concerns about Roblox’s core demographics.
“High-ARPU regions such as the US and Europe [are] already 30% penetrated, suggesting both user and bookings growth may be challenged moving forward, which we think may result in further potential downward revisions. On the creator side of the platform, we view RBLX’s 71% take rate as an impediment to on-board new experienced developers when compared to the more attractive economics of building on other engines such as Unity and Unreal,” the analysts said in a client note.
Net-net, the Underweight rating is mostly a result of rich valuation although they note that RBLX “does have a large advertising opportunity ahead starting in 2023 with immersive ads.”
Roblox shares are down over 70% from their November 2021 peak.
