Why Roblox Stock Just Jumped 9%

Analysts lower price targets, but that's still good news for Roblox.$Roblox Corporation(RBLX)$

What happened

Shares ofRoblox(RBLX-6.05%), the red-hotonline gaming platformthat caters to the elementary-school set, had surged 8.6% as of 12:35 p.m. ET on Wednesday, and they did so after Wall Street analystsdowngraded their price targetson the stock.

Avatars found on Roblox. Image source: Roblox.

So what

Yesterday, Roblox reported metrics for February, showing:

• Daily active users rose 28% year over year to 55.1 million.
• User engagement hours were up 21% year over year at 3.8 billion.
• But estimated bookings (i.e., purchases of Robux) declined 2% to 4% year over year, to somewhere between $203 million and $206 million.

That sounds like bad news, with Roblox warning that average bookings per daily active user (how much each user spent to acquire Robux) fell 24% to 25% year over year to a range of just $3.68 to $3.74 in February. And recognizing this, analysts atStifel Nicolausand Needham lowered their prices on Roblox stock to $65 and $60 a share, respectively, StreetInsider.com reported.

Now what

They were probably right to do so, too, seeing as Roblox is agrowth stockthat ideally should have bookings going up rather than down. Nevertheless, with user numbers rising and engagement going up, Roblox still said it thinks it grew its revenue by at least 60% year over year in February, to somewhere between $204 million and $207 million.

Furthermore, given that Roblox stock currently costs just $41 and change, it seems that many investors were braced for even worse news from the company. If, however, Roblox is still growing revenue nicely, then arguably the stock is still worth buying despite the hiccup in bookings. Indeed, despite their pessimistic forecasts of a $60 or $65 stock price, both Needham and Stifel continue to rate Roblox stock a buy, and predict share price gains of 50% or more over the next 12 months.

In that light, perhaps it's not a surprise that we see Roblox sharesgoing up today.From The Motley Fool