Wells Fargo Lowers Roblox Price Target Amid Warnings of Soft Q2 Guidance

Wells Fargo analyst Ken Gawrelski has issued a cautionary note regarding Roblox (NYSE: RBLX), predicting that the company's second-quarter bookings guidance will likely underperform analyst consensus. While Gawrelski maintains an overweight rating on the stock, he has lowered his price target from $97 to $78, marking the second reduction this year following a previous cut from $107 in February. The analyst forecasts Q2 bookings growth to land between 23% and 25%, a notable dip from the 30% growth expected by the broader market. Because of the way Roblox records its financials, bookings are considered a more accurate reflection of the company's current business momentum than standard revenue figures. In the previous quarter, Roblox demonstrated strong top-line momentum, reporting revenue of $1.4 billion, a 43% increase, and bookings of $2.2 billion, up 63%. However, these gains are offset by a structurally high expense base. A significant portion of revenue is diverted to content creators, while platform fees paid to Apple and Alphabet further compress margins. Beyond the immediate guidance risk, the company's heavy reliance on stock-based compensation (SBC) continues to be a point of contention for investors, as it obscures the path to true profitability. While the expansion of the advertising business is expected to boost margins over the long term, the immediate outlook is clouded by these operational headwinds.