We hope you can join us on Tuesday, June 10th, at 2:00 PM ET, as we present our work on new active short idea Roblox (RBLX). We believe the market is underestimating several critical headwinds that will pressure the stock over the next 12-18 months. Our analysis indicates that RBLX is approaching peak growth dynamics in Q2 2025, driven primarily by the outsized success of "Grow a Garden" in May and favorable calendar positioning with a late April Easter. However, this peak growth moment masks underlying structural challenges that we believe will become increasingly apparent through into 2026 and beyond. Our TAM analysis and user penetration work suggests limited runway for sustained user acquisition at current growth rates, while an increasingly difficult competitive environment—particularly with GTA VI's anticipated May 2026 launch—threatens to disrupt RBLX's core engagement metrics.
The confluence of peak growth timing, competitive pressures, and challenging year-over-year comparisons creates a setup for significant multiple compression as growth rates decelerate faster than the market anticipates. Our financial modeling incorporates these various headwinds and suggests a significantly different trajectory for user growth, engagement, and monetization than is currently reflected in consensus estimates. At $95/share, we see $10-15 of upside and $30-40 of downside over the next 12-18 months.
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Andrew Freedman, CFA
Managing Director
@HedgeyeComm