Shares of Roblox (RBLX -0.40%) gained ground on Monday, surging as much as 6.8%. At 12:28 p.m. ET, the stock was still up 5.5%.
The catalyst that sent the mobile gaming platform higher was bullish commentary by a Wall Street analyst.
MKM Partners analyst Eric Handler raised his price target on Roblox to $40 from $28 while maintaining a neutral (hold) rating on the shares, according to The Fly. The analyst was likely playing catch-up, as the increased price target was already below Roblox's closing price of $42.93 on Friday.
The analyst noted that Roblox's bookings -- which represent the amount of products and services sold during the period -- were trending higher and strengthening faster than previously anticipated. Handler also issued a rare mea culpa, saying that his previous downward price target revisions -- which were issued in response to Roblox's latest release of key metrics -- were overly pessimistic.
The analyst was referring to Roblox's key metrics update for May, the last period for which Roblox released this data. Bookings for the month were estimated to be in a range of $196 million to $199 million, down 10% year over year at the midpoint of its estimate. This would result in average bookings per daily active user (DAU) plunging roughly 23%.
More upbeat were the company's user metrics, as Roblox said its DAUs of 50.4 million climbed 17% year over year, even against the backdrop of last year's pandemic-driven gains. At the same time, engagement improved as user hours increased 10%.
It's important to give this data some context, however. Management attributed the bookings decline to the strengthening of the U.S. dollar versus the euro, British pound, and other foreign currencies. Roblox also noted the impact was more pronounced in May, with the impact of foreign currency headwinds pushing bookings down by roughly 4%.
Roblox is currently down roughly 66% off last year's high, but has been gaining ground, up 96% since hitting a low in May. The decline also pushed the stock's valuation back to earth, with a forward price-to-sales ratio below 10, near its all-time low. This gives investors a rare opportunity to buy Roblox stock at a discount.