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Why Roblox Stock Gave Up Its Gains Today

By Rich Smith – Nov 10, 2021 at 10:50AM

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Easy come, easy go.

What happened

Roblox (RBLX -5.88%) soared 42% on the back of a terrific earnings report Tuesday, but there's a downside to easy money -- sometimes it goes as quickly as it comes.

In Wednesday morning trading, shares of the popular video games platform are retreating 8% as of 10:15 a.m. EST -- and this is despite generally positive commentary on the earnings from Wall Street.

Group of fantastical avatars over company name Roblox.

Image source: Roblox.

So what

In twin reports, one that came out yesterday evening and another that appeared just this morning, first Stifel Nicolaus raised its price target on Roblox stock to $121 per share, then Goldman Sachs raised its price target to $124 a share. As Stifel commented in its note, covered on, Roblox showed "a better finish to 3Q" than analysts had expected, and tacked on "a better start to 4Q" as well.

Overall, Stifel observed that Roblox's performance didn't so much change its opinion of the stock, but rather "merely reinforced our positive longer-term thesis" that Roblox is a growth stock you should want to own. Accordingly, Stifel maintained its buy rating on the shares -- and so did Goldman.

Now what

So that's the good news. Now here's the bad: At least one investor has decided that she doesn't want to own Roblox anymore -- or at least not so much of it. As we just learned, tech investor Cathie Wood capitalized on the strong price performance of Roblox stock yesterday to sell off 82,267 shares from her ARK Next Generation Internet ETF.  

Now admittedly, learning this may not be a great reason to sell Roblox -- like your momma said, "if all your friends jumped off a bridge, would you jump, too?" Then again, selling Roblox stock just because one high-profile investor is selling makes no less sense than buying Roblox stock just because a couple of big bankers said they think it's worth $120 and change.

When it comes right down to it, valuation is what matters. Everything else is just opinion.

Rich Smith owns shares of Roblox Corporation. The Motley Fool owns shares of and recommends Roblox Corporation. The Motley Fool has a disclosure policy.

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