- Roblox's exposure to the metaverse gives it "young tech giant" vibes, Bank of America said in a Monday note.
- The bank reinstated coverage of Roblox with a "Buy" rating and set its price target at $84.
- "Roblox appears to have the only fully fledged metaverse product on the market," BofA said.
Roblox has "young tech giant" potential as it "appears to have the only fully fledged metaverse product on the market," Bank of America said in a note on Monday.
The bank reinstated coverage of the company with a "Buy" rating and a $84 price target, representing potential upside of 26% from Friday's close.
The bank highlighted the strong and growing Roblox community as one of its strengths relative to competitors, as it can count on 50 million daily active users, 3 million creators, and more than 3,000 paid developers. That strong and growing community could solidify its leadership in the metaverse category, which "is now like social media at its dawn," the note said.
"The metaverse category could eventually subsume parts of social media, streaming video and video games (and revenue streams from advertising and ecommerce), so Roblox could eventually encompass more than today's investors can conceive," BofA explained.
Ultimately, Roblox's budding community and vertically integrated coding language could help sales growth accelerate ahead of Wall Street estimates because it "supports a faster than expected product release cadence," BofA said.
Roblox "controls its entire technology stack from coding language to graphics software to compute, including owning high performance data centers and CDNs at locations across the world. The ownership of large scale compute is notable because it offers Roblox a degree of freedom in attaining system performance leadership," BofA explained.
Despite the promising outlook, Roblox's current stock price of about $68 doesn't reflect its leadership in the metaverse, and its current undervaluation means the stock could work even in a down market, the bank said.
Shares of Roblox jumped 5% in Monday trades, but the stock is still down 50% from its record high reached in 2021.
