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Why Roblox (RBLX) Stock Rallied on Tuesday
Shares of online gaming platform Roblox (RBLX - Free Report) popped 3% in morning trading before closing up 2.8% to $42 per share despite a downgrade from Goldman Sachs. Immediately after the announcement of the downgrade, RBLX fell as much as 5% in the early minutes of Tuesday’s session, but the stock quickly rebounded.
Analyst Eric Sheridan cut RBLX’s rating to Neutral from Buy and trimmed the stock’s price target to $50 from $108 per share. The new target now implies a 25% upside. Even though Sheridan downgraded RBLX, there was an overall positive tone in his note to investors.
He said that Roblox is a “most intriguing company” in the broad gaming sector even though the company will face a “unique set of [near-term] challenges” like slowing growth, margin normalization, and tough comparisons. However, Sheridan still expects RBLX to grow revenue over industry levels, and sees the company “pioneering” the next generation of gaming companies.
RBLX is a Zacks Rank #3 (Hold) with a market cap of over $24 billion.