Wells Fargo & Company looks forward to Roblox (RBLX.US) Q3 financial report: bookings may surge 60%, target price raised to $155.

Roblox (RBLX.US) will announce its third quarter performance before the US stock market opens on October 30th. Wells Fargo & Company released a research report, reaffirming its "hold" rating on Roblox and moderately increasing the target price to $155. Wells Fargo & Company stated that investors seeking signs of sustainable booking growth rates can expect performance beyond expectations after experiencing a summer driven by promotional activities. Wells Fargo & Company believes that a 27% to 33% year-over-year growth rate is a reasonable expectation, but the development of secondary income sources remains distant. Q3 bookings are expected to be $1.805 billion, a 60% year-over-year increase, far exceeding the 40%-45% guidance and meeting investor expectations. The estimated number of concurrent users (CCU) for this quarter has more than doubled compared to the previous quarter (up 130%), so the booking volume expectations show a 30% year-over-year decline in booking volume per customer day. This strong performance is not limited to the popular game "Grow A Garden," as bookings for games other than this one are still expected to grow by 43%. "Grow A Garden" is estimated to have bookings of $191 million in this quarter, reaching a peak in July. Q4 bookings guidance is expected to be $1.76 billion to $1.785 billion, a 29%-31% year-over-year growth. After a period of platform expansion, bookings have recovered to a 25% growth level seen in Q1. The guidance has taken into account a significant slowdown since the exit in September, and Wells Fargo & Company estimates that bookings will grow by at least 40% or more. The concurrent users for "Grow A Garden" decreased by about two-thirds from July to September, but platform growth remains strong. It is estimated that Q4 advertising revenue will reach $1 billion for the first time in a quarter, but based on a more gradual promotional plan, Wells Fargo & Company will further revise down advertising expectations. Q3 EBITDA is expected to be $465 million, far exceeding expectations of $3.5 billion to $3.8 billion and the market's general expectation of $3.9 billion. Wells Fargo & Company also includes a 8.5% increase in DevEx payments since September 2nd, which only added $8 million to Q3 DevEx costs. DevEx payments are expected to increase by 70%, a strong competitive barrier. Wells Fargo & Company has raised infrastructure costs by 10%, as management may need to hire third-party cloud service providers to handle the traffic peaks due to the surge in engagement in Q3. The investment trend is expected to continue. Q4 EBITDA guidance is expected to be $4.5 billion to $4.8 billion, with market expectations close to the upper end of the guidance range, as Wells Fargo & Company believes that the market has not yet taken into account the increase in DevEx payments. Wells Fargo & Company pointed out that the first full quarter of increased DevEx payments has increased EBITDA by $18 million. During the earnings conference call, Wells Fargo & Company will seek more insights on opportunities to maintain strong growth in 2026 under difficult baseline conditions and developers' reactions to RDC announcements. Wells Fargo & Company has raised its forecasts for 2025 across the board, with bookings/EBITDA/free cash flow for 2025 expected to increase by 3%/7%/8% respectively. Bookings in 2026 are expected to increase by 1%, as higher microtransactions are offset by lower advertising costs. EBITDA/free cash flow for 2026 will decline by 1% due to the impact of the DevEx activities announced at RDC in September, with expected EBITDA growth in 2027 increased to 2%, leading to an appropriate increase in the target price from $153 to $155, while maintaining a PE ratio of 40 times the 2027 EBITDA.