Shares of Roblox (RBLX 2.43%) were trading up 5.9% as of 11:41 a.m. ET on Thursday after Wedbush raised the near-term price target on the stock from $28 to $34, although that is still below its current price of about $50. The research firm based its call on a better-than-expected start to the third quarter, but maintained its neutral rating on the shares.
The rally across the major market indexes is lifting all boats right now. Year to date, the stock is still down 51%, but a shift in investor sentiment could quickly erase some of those losses.
Wedbush's positive note runs contrary to other analysts who have downgraded the stock over the last few months. However, most of them still rate the stock a buy.
What's concerning for some investors is the decline in bookings (an adjusted measure of revenue), which fell 4% year over year in the second quarter. For July, bookings accelerated their decline, falling between 8% to 10% year over year.
That paints a negative picture of Roblox's business, but it might be performing better than those numbers suggest, since there can be a lag between time spent on the platform and players spending money on extra content, which drives bookings growth.
During the earnings call on Wednesday, management characterized the second quarter as "solid" compared to expectations. While it's not showing up in bookings yet, management said the month of July was "the biggest engagement month in Roblox's history, including peak COVID times."
That can explain why Wedbush is bullish that Roblox might be turning a corner. The company has struggled to grow revenue coming out of the pandemic, but excluding the small decline in the second quarter, it has been more successful attracting users to the platform. That will eventually work to its advantage as management continues to invest in more content and user monetization.