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Sell Roblox as gaming stock can fall further from here, MoffettNathanson says

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It’s time to sell shares of Roblox as they have even further to fall after cratering 65% this year, according to MoffettNathanson. Analyst Clay Griffin initiated coverage of Roblox with an underperform rating, saying it’s too soon to say whether the gaming platform will ever meet its metaverse ambitions. “In a market looking for less evangelism and more ‘meat on the bone,’ there’s plenty of room for the market to lose confidence. A huge range of outcomes could be possible for Roblox, we concede. But at this price, to earn a good return, what do you have to believe? Simply too much, in our view,” Griffin wrote in a Monday note. Roblox was an early pandemic beneficiary that got a boost as children forced to stay indoors from school tended to their digital avatars. Now, however, the analyst finds the stock overpriced. “How much of the bull case that supported a $90B valuation mere months ago is still relevant at $25B? If the bulls were even remotely correct, one might conclude that there must be a bargain to be had here,” Griffin wrote. “But a discount to an impossibly high valuation, even a steep discount, could very well be an improbably high valuation,” Griffin added. The firm’s $19 price target on Roblox implies shares could fall nearly 47% from Friday’s closing price of $35.84. Shares of Roblox declined 0.9% in Monday premarket trading. –CNBC’s Michael Bloom contributed to this report.

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