HomeInvesting NewsCowen rates Roblox at Underperform, thinking that the metaverse is still in...

Cowen rates Roblox at Underperform, thinking that the metaverse is still in its infancy.

Published on

Roblox (NYSE:RBLX)

After Cowen began coverage of the stock with an Underperform rating, the Roblox (NYSE:RBLX) stock market is beginning its Monday with some tiny gains generally higher in the technology sector.

Analyst Doug Creutz predicts that “with the (virtual) world at risk,” competition in the “metaverse,” an area where Roblox and other significant names in technology are attempting to make claims, will be heated.

Creutz observes that the idea that Roblox (NYSE:RBLX) is a significant participant in the metaverse has contributed to the company’s run-up to a high valuation of 53 times the projected 2024 EBITDA. However, the firm is likely to be one of several competitors planning to depend on a prosperous future in the virtual sector.

According to what he has said, “the technological answers required to build a real metaverse may not materialize within a horizon of five to ten years.” “The conceptually appealing characteristics of a metaverse appear to be in conflict with the reality of an Internet that has become controlled by a small number of centralized platforms,”

Roblox (NYSE:RBLX), on the other hand, is not in a fantastic position since it does not have any exclusive material and has a “substantial” tilt toward younger people, according to Creutz. This is true even if the metaverse arrives ahead of schedule.

“We believe Roblox (NYSE:RBLX) faces three structural challenges to the future of its metaverse. These challenges are (1) poor economics for content creators; (2) the need to moderate high volumes of user-generated content for its young audience; and (3) the substantial use of equity compensation, which risks high employee turnover and could hurt the company’s ability to innovate.”

According to him, it’s a fruitful platform for video games and other forms of entertainment, a “primary” destination that offers appealing features for pre-teens and tweens, and so on. However, if the rivalry from giant tech and media competitors becomes more intense, the absence of controlled content and intellectual property may become a key liability.

Because of this, Creutz now considers Roblox (NYSE:RBLX) to be more comparable to a conventional entertainment platform. In the base case, it is assumed that the daily active users will reach 67 million in the fiscal year 2024 (and that margins will reach their lowest point this year). This results in an enterprise value-to-EBITDA multiple of 22x, which leads to a price target of $31, implying a downside of 32%.

The important forthcoming catalyst for the firm is its Investor Day, which will begin on Thursday at 12:00 Eastern Time.

Featured Image – Megapixl © Inkdropcreative1

See Disclaimer Please

 

Latest News

Recent Surge in Tesla Stock: Exactly What Caused It?

Tesla Stock (NASDAQ:TSLA) As of 11:30 a.m ET on Friday, Tesla stock was up 2.3%...

Here’s Why Carvana Stock Fell Quite So Much as 23.7% This Week

Carvana Stock (NYSE:CVNA) According to data provided by S&P Global Market Intelligence, Carvana stock fell...

Here’s Why Tellurian Stock Is Rising Again Today

Tellurian Stock (NYSEMKT:TELL) Tellurian stock was up 6.5% as of 11:06 p.m. ET today after...

Is It Time to Buy Chewy Stock?

Chewy Stock (NYSE:CHWY) Pet supplies are one of the few consumer goods that do well,...

More like this

2 Casino Stocks You Should Consider

With a recession on the horizon, investors must be more selective than ever. Analysts...

(Exxon Mobil Stock) Exxon Ceo Warns Biden Administration Against Restricting Fuel Exports

Exxon (Exxon Mobil Stock) opposes calls for oil corporations to reduce international exports and...

Apple Stock Loses $120 Billion Because of a Rare Downgrade

Apple stock just took a significant knock after it was once considered to be...

Meta Stock Tops Morningstar List of the Most Undervalued Stocks 

Morningstar compiled a list of the most undervalued stocks among those with a large...

Hd Stock up as Foundation to Contribute Up to $1 Million to Aid Communities Affected by Hurricane Ian

HD stock was trading at $280.23 as of 12:55 PM EDT. The Home Depot Foundation...

Making the Cut: Micron (Micron Stock)

Micron Technology Inc (Micron Stock) latest outlook brings expectations back to normal, although the...