Key Takeaways
Jefferies issued an Underperform rating (equivalent to Sell) on Roblox Monday, maintaining a $38 price target.
The price target represents potential downside of 18% from the previous Friday’s $46.44 close.
Since reporting Q2 results, Roblox shares surged 30%, a move Jefferies believes lacks fundamental support.
Analyst James Heaney draws parallels between Roblox’s spending phase and Meta’s 2017-2019 investment cycle that compressed margins.
Analyst opinions diverge sharply: Morgan Stanley maintains an Overweight stance with a $55 target, while consensus hovers at $49.34.
Shares of Roblox tumbled Monday following a bearish call from Jefferies. The stock declined 4.6% to $44.30 during premarket hours, compounding Friday’s 4.9% retreat.
Jefferies slashed its stance to Underperform from Hold. This rating functions as a Sell recommendation.
The brokerage maintained its $38 price objective. This figure represents 18% downside from the $46.44 Friday close.
Shares have surged 30% following Roblox’s July 30 second-quarter results announcement. Despite this bounce, the stock remains underwater by 43% year-to-date.
According to Jefferies analyst James Heaney, the recent run-up lacks justification.
Behind the Bearish Stance
Heaney contends that market participants have adopted an unrealistically positive outlook on Roblox’s bookings growth trajectory over the coming year. He anticipates that improvements in user metrics and bookings within the U.S. and Canadian markets will require more time and capital than current valuations suggest.
“The magnitude of current investments against soft bookings trends will pressure margins,” Heaney stated in his research note. He emphasized that Roblox faces continued heavy expenditure requirements even as bookings momentum decelerates.
Heaney referenced Meta Platforms’ experience from 2017 through 2019 as a comparable scenario. Throughout that period, Meta increased investments in trust and safety initiatives while facing revenue growth headwinds related to the Instagram Stories transition.
“RBLX is similarly in investment mode,” he noted.
Jefferies also examined the composition of Roblox’s U.S. and Canada user expansion. Daily active users surged from approximately 20 million in early 2025 to 26 million at the Q3 peak. The firm attributes this spike to viral sensations like Grow a Garden and Steal a Brainrot, though these titles failed to retain users long-term.
The Data Supporting the Downgrade
Roblox’s revamped content recommendation system now prioritizes experiences demonstrating superior long-term user retention. Jefferies believes this shift will constrain near-term user acquisition over upcoming quarters.
The firm expressed skepticism about daily active users returning to 25 million levels until the algorithm demonstrates capability to penetrate new gaming categories and attract meaningful audiences above age 18.
Bookings, which serve as Roblox’s primary revenue indicator, increased 8% to reach $1.57 billion during Q2. This figure landed at the bottom end of management’s $1.55 billion to $1.61 billion guidance bracket.
For the third quarter, Roblox projects bookings between $1.58 billion and $1.65 billion. This guidance implies a sequential contraction of 14% to 18%.
Barron’s featured Roblox as a recommended position on November 25, 2025. The stock has plummeted 49% following that recommendation.
Not all Wall Street analysts share Jefferies’ pessimistic view. Morgan Stanley analyst Matthew Cost stated on September 14 that Roblox demonstrates “encouraging” progress in expanding its total addressable market through AI-powered creation tools, advertising initiatives, and subscription offerings.
Morgan Stanley maintains an Overweight rating alongside a $55 price target, significantly above current trading levels.
Among 32 analysts monitored by FactSet, Roblox holds an average Overweight recommendation with a $49.34 consensus price target. The ratings distribution includes 15 Buy recommendations, 14 Hold ratings, and three Sell ratings.
Jefferies additionally highlighted newer viral titles such as Steal an Egg, suggesting these games won’t attract new demographic cohorts in the manner previous breakout hits achieved.
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