This Gaming Stock Soared 180% in 1 Year. A Veteran Analyst Predicts More Gains

What an incredible past year it’s been for shares of video-game firm Roblox (NASDAQ:RBLX), which are now up close to 180%. Indeed, the big comeback rally may not be ready to conclude as the firm looks to ramp up its ambitions by going after an even larger slice of the video game market.

With daily active users blasting past analysts’ expectations — thanks in part to smash hit “Grow a Garden” (a game within the game) — and continued success in better resonating with gamers older than 13, it seems like prime time to give the once-fallen disruptive innovator a second look as prior all-time highs, previously seem by some as unreachable, comes within sight.

Key Points in This Article:

• Since hitting their 2023 lows, shares of Roblox have surged nearly 278%. 
• The stock receives a consensus “Moderate Buy” rating from 22 Wall Street analysts. 
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Sure, shares of RBLX have gained 277.63% since hitting their five-year low in May 2022. But the stock is still down around 22% from its all-time high in November 2021. With the way the stock has been rallying, it could surpass those highs before 2025 comes to a close. 

Indeed, Roblox has a walled garden of sorts, and as it continues to develop its platform and tools to further enable its creators to build more blockbuster experiences like “Grow a Garden,” it’s tough to envision a scenario that sees gamers putting down their controllers (or phones) anytime soon. Add monetization efforts into the equation (paying in-game currency to view ads via “Rewarded Video ads” is a very intriguing concept), and Roblox seems like the gaming stock to stick with for the long haul.

Can the Hits Keep Coming for Roblox?

Roblox stock’s recent multi-year rally is a thing of beauty. If the stock’s to sustain a big breakout, it’ll need to keep serving up the smash hits. Indeed, Roblox already has a powerful creator ecosystem. If the company can give its creators better tools, they should be able to build more, better experiences on the platform. Of course, it’s tough to tell if the hits can keep on coming. Either way, the profound success of “Grow a Garden” suggests that all it takes is one or two needle-moving games to really power Roblox to higher highs.

Now, “Grow a Garden” is a record breaker. And it’s tough to forecast what the next big viral sensation will surpass it. In any case, the highly replayable hit game seems to have staying power. Given this, I don’t expect the recent surge in daily active users to reverse course. With a nice ecosystem that benefits from network effects, Roblox does have a fairly sizeable moat. And while future hits are going to be tricky to forecast, I find that management is making good on new monetization opportunities. 

Competition in Gaming Could Get More Fierce in 2026

The major risk for Roblox, I believe, lies in increased competition across the massive gaming market. Notably, the launch of Grand Theft Auto VI, now scheduled to launch next year, could have the potential to act as a significant headwind for a number of video-game firms out there. Indeed, if Roblox creators can keep driving engagement, there is a scenario that sees Roblox continuing to gain as the battle for engagement kicks things up a notch next year. In that regard, Roblox seems like a great long-term hold, but perhaps on a pullback.

In my view, the name is overbought and a tad pricey, with shares going for close to 18 times price-to-sales (P/S). Though I am encouraged by “Grow a Garden” and its ability to keep players engaged for longer, the high degree of unpredictability with regard to future hits makes the stock more of a wait-and-see type of play.

Oppenheimer Sees New Highs for RBLX on the Horizon

Though I’m a bit cautious on the valuation, Oppenheimer analyst Martin Yang seems to think Roblox can gain another 20% or so from today’s levels. He views the firm as “one of the most exciting profitable growth stories in the interactive entertainment industry.”

With potential growth in ads and strength in user engagement, it’s not hard to understand why Mr. Yang is staying bullish. He’s a respectable veteran analyst, and his words shouldn’t be taken lightly. Perhaps Roblox can grow into its seemingly high multiple and sustain some sort of breakout.

More broadly, 22 Wall Street analysts give Roblox a consensus “Moderate Buy” rating, with 15 analysts assigning it a “Buy” rating, five assigning it a “Hold” rating and two assigning it a “Sell” rating. 

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