It’s time to get out of Roblox following its strong December report, according to Morgan Stanley. Analyst Matthew Cost downgraded shares of the gaming company to underweight from equal weight, saying upside is limited from here after the stock’s recent outperformance. On Tuesday, Roblox shares closed 11% higher following its December 2022 metrics report, which showed estimated bookings came in between $430 million and $439 million for the month , or 17% to 20% higher year over year. The gaming company calls its revenue figure bookings. “Heading into ’23, we had maintained a balanced view on RBLX as we believed that strong holiday seasonality and easy comps through mid ’23 would lead to a series of monthly metric releases showing accelerating bookings growth,” Cost wrote Thursday. “However, following the significantly stronger than expected December results, RBLX is now up 28% YTD and we believe the 1H:23 reacceleration is now fully priced in, with more mixed catalysts ahead,” Cost added. Roblox shares may be surging to start 2023, but they took a beating last year, closing down about 72% in 2022. The analyst lowered his price target to $24, down from $27.50, implying shares could tumble another 32% from Wednesday’s closing price. What’s more, the analyst holds a $10 price target in his bear case. Shares fell more than 6% in Thursday premarket trading. The analyst expects slower growth to start in the second half of 2023. While Roblox expects that immersive advertising will be a key growth driver in 2023, the analyst expects the rollout will be too slow to support the stock. “We believe the 1H bookings reacceleration looks priced in, with more mixed catalysts ahead as we expect slower growth in 2H and minimal upside from advertising in the near term,” Cost wrote. —CNBC’s Michael Bloom contributed to this report.
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