Further Guidance Cuts for Roblox Are Unlikely, Says BofA

Roblox (NYSE:RBLX) saw a significant decline in shares last month after announcing a reduction in its bookings growth outlook for 2024 from 20% to 15%.

Despite this, Bank of America analysts maintain a positive outlook on the stock, stating that another reduction in guidance for this calendar year is "highly unlikely." The bank reaffirmed its Buy rating on Roblox on Thursday and increased its Q2 bookings growth estimates. The bank now expects Roblox’s bookings to grow by 17.5% year-over-year in the second quarter, up from the previous estimate of 15%. This revision is based on their belief that core markets will sustain a growth rate of over 20% year-over-year for the remainder of Q2.

The analysts emphasized that their projections exceed the upper range of the company's guidance (15.3% year-over-year) and the highest consensus estimate (14.9% year-over-year). They also highlighted that Roblox reported on its Q1 call that US and Canada bookings growth had recovered to above 20% in late April and early May.

Bank of America has also increased its full-year 2024 growth estimate for Roblox to 17% year-over-year from 16.5% year-over-year. This adjustment reflects the potential that Roblox might not yet consider its search and discovery upgrades fully complete.

Two factors contribute to this assessment: Roblox will have only 15 weeks of data before issuing its next guidance, and the search and discovery improvements have not been fully implemented in some non-core regions.