Roblox may rise 18% as it benefits from 2 ‘viral cycles’ that should boost monetization, says Stifel

• Stifel started covering Roblox on Monday with a Buy rating and $ 85 target price, representing an 18% upside potential.
• Roblox is exposed to two “viral loops” that are expected to generate engagement and monetization, said Stifel.
• Roblox’s large and growing ecosystem of users and developers bodes well for the company as the creation of digital content continues to gain momentum, said Stifel.
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Roblox received its first Wall Street analyst coverage on Monday, with Stifel classifying the online gaming platform as Buy with a $ 85 price target, representing an 18% upside potential as of Monday’s close. .

Roblox went public earlier this month with a direct listing on the New York Stock Exchange and is currently valued at more than $ 40 billion. The shares are more than 60% above their direct reference price of $ 45 per share.

According to Stifel, the company is prepared to benefit from two “viral loops” that should reinforce Roblox’s network effect and generate greater engagement and monetization on the platform: content and social.

“The creation and use of digital content has emerged as one of the most popular forms of entertainment, which, combined with Roblox’s large and growing ecosystem of users and developers, bodes well for the company,” explained Stifel.

Roblox currently has more than 30 million users and 8 million developers who converge on an online social gaming platform where new games can be created quickly and take off like wildfire.

“The model is unlike any we have encountered,” said Stifel of Roblox. Roblox is a gaming platform that features sets of tools for building content, a social media platform, since Roblox experiences are highly social, and an entertainment platform, as user-generated content, including games, is a critical component, according to Stifel.

In addition to the network effect inherent in his model, Roblox should also benefit from the strong growth in the video game industry, which is expected to continue even after the COVID-19 pandemic, Stifel said.

But Roblox faces several risks, including difficult comparisons in 2021 after a strong 2020 and potential security problems for younger users, Stifel pointed out.

The company achieved its price target of $ 85, using a multiple of 19 times in its estimate of $ 2.81 billion for 2022, according to the note.