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Roblox Receives its First Sell Rating From Benchmark

Roblox shares fell, after Benchmark began coverage of the online video game company with a sell rating and a $75 price target.
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Roblox  (RBLX) - Get Roblox Report shares fell Tuesday, after Benchmark began coverage of the online video game company with a sell rating and a $75 price target.

That’s based on a tepid forecast for company growth post-pandemic. And it’s the first sell rating and the lowest target price on Wall Street, according to Bloomberg.

Roblox traded at $84.32, down 2.6% at last check. But it has climbed 21% over the past six months amid strong demand for video games during the pandemic.

The recent rally “has more than effectively priced in” the company’s growth opportunity, wrote Benchmark analyst Mike Hickey, Bloomberg reports.

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“The RBLX metaverse platform was a social utility during the pandemic, which could unwind as social restrictions are removed, schools reopen and parental spend reallocates,” he said.

Strong competition and shifting demographics also could stifle growth, Hickey said.

Roblox reported a drop in daily usage for May and said future per-user revenue will be lower. That raised concerns that the company won’t bring in as much cash as expected.

Roblox, which went public in March, reported 43 million daily active users in May. That was down from 43.3 million in April, but up 28% from May a year ago.

Roblox and other gaming companies enjoyed unprecedented user surges during pandemic shutdowns. But with the U.S. economy reopening, demand for home entertainment options is expected to fall or at least plateau.

That prompted at least three analysts to issue cautiously-toned notes following Roblox’s announcement. The analysts are Matthew Thornton of Truist Securities and Matthew Kanterman and Nathan Naidu of Bloomberg Intelligence.