Roblox stock's current valuation aggressively factors in a metaverse future that's still likely far away, wrote Cowen analysts, who initiated coverage of the shares at Sell with a $31 price target.
Roblox Shares have lost half their market value this year, and are down 68% from a record intraday high of $141.60, set in November.
"We view Roblox as a successful videogame and entertainment platform with some attractive characteristics," wrote analyst Doug Creutz in a research report, "but we believe current valuation far too aggressively factors in a metaverse future that is likely still far away and may arrive in a fashion that leaves Roblox as just one of many players."
"We believe that fictional depictions of the metaverse offer a good guide to what any eventual metaverse is likely to become," he added. But "[t]echnical solutions needed to create a true metaverse may not materialize within a 5- to 10-year horizon."
Investors clamored for a piece of the gaming-platform stock after it went public in 2021 as it promised a successful metaverse-style product. Roblox stock, which first traded at $64.50 in its direct listing in March 2021, and soared later that year.
But shares tumbled in 2022, on a string of wider-than-expected quarterly losses. Inflation has set in and Roblox users have cut back. The average booking per daily active user, which includes some adverting and licensing revenue, was $12.25 in the latest fiscal second quarter, down 21% year over year.