Roblox (RBLX) shares came under pressure after Jefferies downgraded the stock to “Underperform” from “Hold,” arguing that the rally following the company’s second-quarter results had priced in an “overly optimistic” bookings outlook. Analyst James Heaney maintained a $38 price target, implying over 12% downside from RBLX stock’s Oct. 1 close, and said improvements in U.S. and Canadian users and bookings could take longer and cost more than investors expect.
Jefferies also expects Roblox’s platform changes to weigh on near-term growth. The firm projects just 5% fiscal 2027 bookings growth, compared with a 13% Wall Street consensus. The brokerage believes Roblox’s new recommendation algorithm, higher developer payouts, infrastructure spending, and investments tied to generative AI could create additional pressure on bookings and margins before the company’s longer-term initiatives begin to pay off.
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About Roblox Stock
Roblox is a technology and gaming company that operates an immersive online platform where users can explore experiences and connect with others, while creators use Roblox Studio to build and publish digital experiences and content. The company also provides Roblox Cloud, which supplies the infrastructure and services supporting its platform. Founded in 2004, Roblox is headquartered in San Mateo, California, and has a market cap of $30.3 billion.
RBLX has experienced a sharp decline, with shares down 68% over the past year and 47% year-to-date (YTD) as investors remain cautious about its fundamentals.
Notably, the stock initially came under heavy pressure following Roblox’s second-quarter earnings report on July 30, when the company reported 8% year-over-year (YoY) bookings growth to $1.6 billion, at the low end of its guidance, while its outlook pointed to a 14%-18% YoY decline in third-quarter bookings. The company attributed the weakness partly to lower monetization per hour and changes to its recommendation algorithm that shifted engagement. RBLX stock plunged 26.9% on July 31, closing at $35.60.
However, Roblox shares subsequently staged a significant rebound, closing the last session at $43, helped in part by optimism that bookings could recover.
Nevertheless, RBLX fell 9.86% on Sept. 28 after Jefferies downgraded the stock, arguing that the post-earnings rally had reflected hyped expectations for the company’s bookings trajectory. The shares then slipped another 1.6% on Sept. 29, while rising 2.9% in the last two sessions, bringing the decline over the five sessions to about 7%.
In terms of price-to-sales (P/S) ratio, RBLX stands at 5.73, above the industry average despite the stock price slump.
www.barchart.com Mixed Q2 Results
Roblox reported its second-quarter 2026 results on July 30. Revenue rose 36% YoY to $1.5 billion, while bookings increased 8% to $1.6 billion. Roblox said the bookings growth landed at the low end of its guidance range, primarily because monetization per hour declined, particularly among younger users in the U.S. and Canada.
User engagement remained solid. Daily active users (DAUs) increased 10% YoY to 123 million, while hours engaged rose 5% to 29 billion. Roblox noted that the reinstatement of its platform in Russia in June provided a modest sequential benefit, although the Russia disruption remained an approximately three-percentage-point headwind to YoY DAU and hours growth during the quarter. The company also highlighted continued growth among older users as U.S. users aged 18 and above increased 32% YoY, while their hours rose 27%.
Profitability and cash generation improved substantially. Roblox’s net loss narrowed to $185 million from $280 million in Q2 2025, while adjusted EBITDA surged to $152 million from $18 million a year earlier. Operating cash flow increased 60% to $318 million, and free cash flow climbed 66% to $294 million.
The main concern was monetization rather than user engagement. Roblox said users were shifting away from highly monetizing viral games released in 2025 toward newer and evergreen games that generate lower monetization per hour. Changes to its Recommended for You (RFY) algorithm also deliberately directed more impressions toward games with stronger retention, sacrificing some near-term monetization. The company expects this monetization softness to continue in the near term, even as it believes higher retention can eventually offset the decline in hourly monetization.
For the third quarter of 2026, Roblox guided for revenue of $1.413 billion to $1.490 billion, representing 4%-10% YoY growth, and bookings of $1.576 billion to $1.653 billion, representing a 14%-18% YoY decline. The company expects a consolidated net loss of $307 million to $348 million and adjusted EBITDA ranging from $0 million to $41 million. Its free cash flow is projected between negative $60 million and positive $5 million.
In addition, analysts expect a loss per share of $1.39 for fiscal 2026, representing about a 9.7% YoY improvement, while fiscal 2027 loss per share is expected to improve 6.5% to $1.30. For the third quarter, the consensus estimate calls for a loss per share of $0.41, deteriorating about 10.8% from the prior-year period.
What Do Analysts Expect for RBLX Stock?
While Jefferies took a bearish stance, Wells Fargo maintained an “Overweight” rating on RBLX stock this month while raising the price target to $64 from $46, mentioning that Roblox’s business had bottomed out and that a positive inflection was underway.
On the other hand, BofA Securities maintained a “Neutral” rating on Roblox while raising the price target to $48 from $44.
Overall, RBLX stock has a consensus “Moderate Buy” rating. Out of 28 analysts covering it, 10 recommend a “Strong Buy,” one suggests a “Moderate Buy,” 14 analysts stay cautious with a “Hold” rating, one gives a “Moderate Sell,” and two offer a “Strong Sell.”
RBLX’s average analyst price target of $49.65 reflects an upside of 16%, while the Street-high target price of $95 suggests a 122% upside ahead.
www.barchart.com On the date of publication, Subhasree Kar did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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