Roblox's Stock Forecast in 2025: Choosing a Good Entry Point

Roblox stock got listed on the NYSE on March 10 under the ticker symbol “RBLX.” The mobile gaming platform finally took the plunge after putting off its IPO in 2020. Amid increasing SPAC-mania, Roblox went for a direct listing. 

Investors were optimistic about the IPO. The stock opened at $64.50 per share, which was much higher than the valuation of $45 per share it had in a private financing round in January 2021. What is Roblox’s (RBLX) stock forecast in 2025?

After listing, investors continued to bid the stock price higher and RBLX reached a high of $77 on March 16. Since then, the stock has pulled back by nearly 13 percent. After the initial euphoria, investors are probably re-assessing the stock’s rich valuation. This might have led to a stock decline. Even now, the stock is trading about 50 percent higher than its IPO price. Future price declines in the stock can't be ruled out as the initial enthusiasm for the stock fades.

Currently, only one analyst, Stifel Nicolaus, covers the stock. The firm has a buy rating and a target price of $85 for the stock. The target price represents a potential upside of 26 percent for the stock from the current market price. The analyst termed the stock as a “compelling play on the convergence of content and social.” He also sees the growth in the company’s hours engaged, bookings, favorable video game industry outlook, and a significant longer-term opportunity in China as key positives.

The near-term and medium-term forecast for Roblox might be robust, but what about the long term? Where could the stock be in 2025? The company experienced a growth of 82 percent in sales YoY in 2020. Along with the rising popularity of online content and games, the growth was accelerated by the COVID pandemic. While the growth of this magnitude isn't expected to continue going forward, it should still remain significant.

According to Statista, the revenue in the Online Games segment is expected to show an annual growth rate (CAGR 2021–2025) of 7.36 percent, which results in a projected market volume of $31.3 billion by 2025. Roblox’s innovative business model fits perfectly into this trend and it should grow by leaps and bounds to take advantage of the growth in this market segment.

Roblox has created a large network of content and community with more than 32 million daily users and the network is still growing. This has created a network effect, which will help in monetization for the gaming platform. The company has also been able to create a unique convergence of users and developers on its platform, which helps develop innovative games very quickly.

While Roblox might be a good long-term investment, it's equally important to choose a good entry point. The enthusiasm after its IPO has bid up the stock a lot. Even after the recent pullback, the stock is trading nearly 50 percent above its IPO price of $45. As investors reset their expectations following difficult comps for the company in 2021, it should pull back more, which would create an opportunity for long-term investors to enter the stock.