J.P. Morgan cuts Roblox to Impartial, backing off views on gross sales and margins (NYSE:RBLX)

J.P. Morgan has downgraded Roblox inventory (NYSE:RBLX) to Impartial, amid some variable efficiency in bookings that it says portends “extra modest” gross sales development and margins within the coming 12 months.

That got here after some core profitability measures got here up quick in Wednesday’s third-quarter earnings.

Roblox (RBLX) is rallying Thursday together with the remainder of the market, up 7.4% in a bounce off its post-earnings decline.

Tendencies confirmed enchancment over the previous three months, analyst David Karnovsky says, however the total outcome upset and was extra variable than anticipated.

The corporate’s share value response – a 21% slide “to what we predict was a slight miss to investor expectations additionally leads us to consider the bar for development is way increased than we thought,” Karnovsky stated.

The agency had anticipated bookings to develop within the excessive teenagers in 2023, however now sees bookings exiting 2022 at a mid-teens development fee that ought to proceed by way of the brand new 12 months.

He additionally raised flags with EBITDA margin steerage for beneath 10% a minimum of by way of the following 12 months, within the wake of September’s investor day that featured commentary on driving margins again to pre-COVID ranges.

“We proceed to be believers” within the long-term view, and see Roblox as a pacesetter within the rising metaverse, however at present see upside to shares as “restricted” with ongoing volatility, Karnovsky stated.

For the fourth quarter, he now sees $894M in bookings and a corresponding decline in EBITDA to $105M from a earlier $146M. He is additionally trimming EBITDA margin expectations for 2022 to 9.7% from a earlier 11.6%. Decrease bookings development in 2023 additionally signifies that EBITDA projection falls to $278M (a 9% margin) from a earlier $431M (12.6% margin).

The agency’s one-year value goal drops to $35 from a earlier $53, now implying simply 5% upside.

Wall Road analysts total fee Roblox inventory (RBLX) a Purchase, whereas In search of Alpha authors name it a Maintain. In search of Alpha’s Quant Rankings additionally see Roblox as a Maintain.