Roblox Corp (NYSE: RBLX) is in focus this morning after Hindenburg Research criticized the online gaming platform for lying to its investors.
On Wednesday, the investment research firm accused the company’s management of greatly inflating key metrics, including the number of daily active users in pursuit of a higher stock price.
Hindenburg revealed a sizable short position in Roblox stock and called it an “X-rated pedophile hellscape, exposing children to grooming, pornography, violent content, and extremely abusive speech” in its report as well.
RBLX has lost about 17% over the past two weeks.
Roblox says Hindenburg accusations are misleading
Roblox stock is keeping somewhat resilient in the face of the Hindenburg news, and for good reason too.
The California-based company has already dismissed the aforementioned claims as “misleading”, adding “the authors are short sellers and have an agenda irrespective of the substance of Roblox’s business model and results.”
RBLX also confirmed this morning that it invests rather aggressively in safety and civility that have been “foundational” to the company since its inception in 2004.
So, the Hindenburg development, at least so far, is nothing more than a “he said, she said” affair.
Panic selling the company’s shares at this point would, therefore, be a bit premature.
That may be a part of the reason why Wall Street continues to rate Roblox stock as “overweight”.
Analysts see an upside in it to over $45 on average which indicates potential for about a 12% gain from here.
What could help push Roblox stock further up?
Shares of Roblox Corp remain worth owning at writing because the company is growing revenue and bookings at an impressive pace.
The two metrics were up 31% and 22% on a year-over-year basis, respectively, in its latest reported quarter on increased monetization related to new users signing up on the platform.
The double-digit revenue growth is all the more notable considering Roblox is only starting to capitalize on digital advertising.
Its user base is now aging up which will ultimately help boost its ad revenue considering advertisers prefer to engage with users with significant spending power.
Since advertising tends to be a higher-margin business, expanding its footprint in ads could help RBLX ramp up its road to profitability as well.
Among notable names that are heavily invested in Roblox stock currently is Cathie Wood – the founder and chief executive of Ark Invest. In August, she spent about $5.6 million to load up on 137,785 shares of the New York-listed firm, indicating immense confidence in what the future holds for RBLX.
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