'Fierce Competition,' Young User Base Challenges for Roblox: Wedbush

Wedbush remains positive about Roblox’s “first mover advantage,” its technology and the potential for mergers and acquisitions, but it has concerns about the online game platform’s high platform fees, its young user base and “elevated levels of investment at the expense of operating leverage,” analyst Michael Pachter wrote investors Friday. A bear view is that “fierce competition, lack of compelling content, and a young user base will prevent Roblox from becoming an important part of the Metaverse over the long term, and growth rates will continue to fall,” Pachter warned. As a base case, he said the platform will “remain relevant” in the evolution of the metaverse via its user base, infrastructure and technology, “but it faces an uphill battle to successfully fend off larger peers.” Wedbush maintained a “neutral” rating and a $28 12-month price target on the stock, which was trading at the time of the note at $30.50.