Morgan Stanley analysts downgraded Roblox Corporation (NYSE:RBLX) to ‘Underweight’ from ‘Equal-weight’ and lowered their Price Target on the shares to $24 from $27.50, citing ‘slower growth in 2H and minimal upside from advertising in the near term.’
In their recent note, the analysts highlighted RBLX’s “stronger than expected” report of December 2022 activity which sent shares “up 28% YTD” and noted that the recent gains mean “the 1H:23 reacceleration is now fully priced in.”
They now see only “mixed catalysts ahead,” noting that “the comps become materially tougher beginning in May ’23 and we expect a strong y/y deceleration to begin in 3Q:23.”
The analysts also comment on the outlook of potential gains from immersive ads noting that “while the market remains focused on advertising as a key growth driver… we expect a slow rollout and limited financial impact in the near-term.”
On the sum of factors, Morgan Stanley believes “the risk reward skew for RBLX shares has turned sharply negative”, and downgrades the shares to “Underweight” rating with a reduced $24 Price Target.
RBLX is trading around $33.30, down nearly 7% in pre-market, erasing most of the post-announcement gains.