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.

Developments confirmed enchancment over the previous three months, analyst David Karnovsky says, however the general outcome dissatisfied and was extra variable than anticipated.

The corporate’s share worth 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 larger 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 price that ought to proceed via the brand new 12 months.

He additionally raised flags with EBITDA margin steering for under 10% at the very least via 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 frontrunner within the rising metaverse, however at the moment 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 implies that EBITDA projection falls to $278M (a 9% margin) from a earlier $431M (12.6% margin).

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

Wall Avenue analysts general price Roblox inventory (RBLX) a Purchase, whereas Looking for Alpha authors name it a Maintain. Looking for Alpha’s Quant Scores additionally see Roblox as a Maintain.