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Roblox (NYSE:RBLX) stock is up today even after Morgan Stanley cut its price target on the video game giant. Morgan Stanley lowered RBLX’s price target from $32 to $27, while issuing a stark bearish warning on the stock. Despite this, RBLX is up about 4% so far today on an overall solid day for the markets.
Morgan Stanley analyst Brian Nowak expressed concern over the company’s top-line growth in the second half of the year. Nowak also predicted that increased investments to developers may negatively affect the company’s margins, while questioning the dilutive impact of certain stock compensation options offered by the company.
Nowak reiterated his “equal weight” rating but warned of a potential bear case where the stock drops as low as $15 per share.
“Given management’s commentary around continued investment in the developer community … we now expect DevEx to remain elevated going forward, as we raise our ’22 estimate by 13% and expect this line to reach 24% of bookings by ’24 and 25% over the long term. With that in mind, we expect significant pressure on near term profitability as this higher level of investment (combined with our reduced bookings expectations) leads us to reduce our ’23 EBITDA estimate by 25%.”
RBLX Stock Climbs After Monumental Year-to-Date Losses
Roblox is enjoying a strong day but still has a ways to go to overcome its losses so far this year. RBLX is down more than 67% year-to-date. The company has been one of the larger casualties of the tech and growth-stock selloff this year.
Since going public last year, the video game company has seen sharp peaks only matched by brutal troughs. Since its all-time high of $134 per share last November, RBLX has seen its value plummet. Currently the company is trading for about $32, reeling from this year’s cold streak.
The game is considered a modern example of the burgeoning metaverse concept and has seen strong year-over-year growth since 2018. Investors will surely be eager to see whether Morgan Stanley’s latest bearish forecast comes to pass for Roblox.
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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