That said, bulls could argue that the disparity is, at least in part, justified due to RBLX’s more rapid growth rate. Whereas the peer group has positive earnings and thus trade at arguably reasonable P/E multiples across the board, RBLX remains unprofitable: RBLX trades far higher than its peer group consisting of Zynga ( ZNGA), Take-Two Interactive ( TTWO), Activision Blizzard ( ATVI), and Electronic Arts ( EA): The case for overvaluation is rather nuanced, however, we can first start with a comparison with the peer group. I have found that typically with high-flying unprofitable companies like RBLX, if the target price is not much higher than the current price, then the stock may be deeply overvalued, as the projections are likely already optimistic. The average price target is just under $90 - which represents only 8% upside from current levels. Wall Street analysts are on average, slightly less than bullish. The stock is trading 19% higher than its first day of trading, and over 80% higher than its IPO price. The stock briefly touched $100 per share, before falling down to $83 per share. Roblox Stock PriceĪfter pricing its initial public offering at $45 per share, RBLX closed its first day of trading at $69.50 per share. In spite of the overvaluation, it is possible that RBLX can outperform to the upside - but that would be assuming unrealistic expectations. I also explain why RBLX is likely to struggle with generating meaningful net margins, which makes it easy to form the case that the stock is currently overvalued. I explain why I expect growth rates to decelerate rapidly in future quarters. The online game platform at one point traded over 100% higher than its IPO price, and has been generating strong revenue growth even as it laps pandemic quarters. Roblox ( NYSE: RBLX) was one of the highly anticipated IPOs this year.
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