Roblox stock may rally further as Citi sees more runway growth

Citi analysts reiterated a Buy rating on Roblox (RBLX) and raised their price target to $123 from $100, citing significant further upside despite the stock's recent 55% surge. Their optimism is driven by robust second-quarter user data, which suggests bookings could be 32% above the high-end of Roblox's guidance, and the potential for a $220 million to $600 million boost to EBITDA from a favorable U.S. court ruling on App Store fees, which could reduce platform costs from major partners like Apple and Google.

Analysis

Citigroup has reiterated its positive outlook on Roblox (RBLX), raising its price target to $123 from $100 while maintaining a Buy rating. This confidence persists despite the stock's significant 55% rally since its Q1 earnings, which analysts believe has priced in approximately $880 million in annual EBITDA. The bullish thesis is supported by two key catalysts. First, strong third-party data from RoMonitor suggests potential for a substantial Q2 earnings beat, with analysis indicating that bookings could reach $1.56 billion, which is 32% above the high end of Roblox's own guidance for the quarter. Second, a favorable U.S. court ruling on April 30, which requires Apple to permit third-party payment systems, presents a major tailwind for profitability. Given that Apple and Google account for 30% and 16% of Roblox's revenue respectively, Citi estimates that reduced platform fees could boost annual EBITDA by a range of $220 million to $600 million. The new price target is supported by a valuation of approximately 50 times estimated 2026 free cash flow per share.

Key Decisions for Investors

• Investors with a bullish thesis may view Citi's analysis as a strong signal, particularly the third-party data suggesting Q2 bookings could significantly outperform company guidance.
• It is crucial to monitor the upcoming Q2 earnings release to validate whether the robust user data translates into official results, as any disappointment could trigger a correction given the stock's recent 55% rally.
• The potential EBITDA uplift of $220 million to $600 million from reduced App Store fees represents a significant long-term catalyst; investors should track developments on the implementation of the court ruling as it directly impacts profitability and valuation.
• Consider the potential negative implications of this court ruling for platform holders like Apple and Google, which could be a factor in portfolio allocation or for potential pair trades.