Roblox Stock Is Falling After Morgan Stanley Lowered Its Rating, Citing Problems With Bookings

Roblox Stock

Roblox Stock (NYSE:RBLX)

Following a downgrade from Morgan Stanley analyst Matthew Cost on Thursday, shares of video game platform business Roblox (NYSE:RBLX) plummeted almost 8%. Cost said that any reacceleration in bookings appeared to be priced into the Roblox stock price.

After noting that investors were anticipating excellent results from the firm, as shown by its recently announced December data, Cost downgraded Roblox stock to underweight from equal-weight and set a price objective of $24 per share.

Cost said he was keeping a level head on Roblox (NYSE:RBLX) heading into 2023 because he expected “a series of monthly metric releases indicating accelerated bookings growth” due to strong Christmas seasonality and easy comparables through the middle of the year.

Roblox (NYSE:RBLX) had far better-than-expected earnings in December, and Cost said the company’s stock has since risen 28% this year because “we think the [first-half of 2023] reacceleration is now fully priced.”

For the second half of the year, Cost predicts weaker growth for Roblox (RBLX) due to tougher comparisons beginning in May and a “strong” decline beginning in the third quarter. When asked about Roblox’s (NYSE:RBLX) growth rate for the year, Cost said it was probable that it would be around 5%.

Daily active users in North America have been “extremely unpredictable,” with consecutive figures being flat or down in five of the previous eight quarters, so any notion that these patterns could be generalized to the rest of the globe is false, Cost added.

According to Cost, the North American user base might have a higher influence on the firm’s revenue growth, so the corporation is more apprehensive about the prospects of the North American user population.

Though Cost believes immersive advertising is a promising area for expansion, he cautions that its widespread adoption is likely to be gradual, with “minimal” financial effect in the short term.

Morgan Stanley, it should be noted, is a big fan of Activision Blizzard and Take-Two Interactive in the video game and interactive media sector.

As reported by Bank of America on Wednesday, the December numbers bolster the bull argument for Roblox stock.

Featured Image: Megapixl @ Rimidolove 

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