Jefferies cuts Roblox to underperform with $38 target

Jefferies downgraded Roblox to Underperform from Hold on September 28, 2026. The brokerage warned that the stock's 30% rally since second-quarter results reflects overly optimistic expectations for bookings over the next 12 months. It maintained a price target of $38, implying an 18% downside.

Analyst James Heaney noted that while Roblox is expanding into adult users and new game genres, improving user and bookings growth across the United States and Canada will be longer and more costly than the market expects. Daily active users in that region rose from roughly 20 million in early 2025 to a peak of 26 million in the third quarter of 2025, largely driven by viral titles like Grow a Garden and Steal a Brainrot that lost players quickly. Jefferies added that a new algorithm favoring player retention will constrain user growth over the coming quarters.

Jefferies forecasts 5% bookings growth in fiscal 2027, below the Wall Street consensus of 13%. The firm lowered its fiscal 2027 bookings forecast by 6% and slashed its EBITDA projection by 21%. Heaney compared Roblox to Meta between 2017 and 2019, when heavy spending compressed margins during a revenue slowdown.

Roblox faces rising expenditures as it increases payouts by 42% for U.S. in-game spending from players aged 18 and older, ramps up infrastructure spending for generative AI adoption and model training, and diversifies through initiatives like Roblox Everywhere. Consequently, Jefferies models no EBITDA margin expansion until fiscal 2028.