D.A. Davidson reiterates Buy rating on Roblox ahead of AI integration

Yahoo Finance Live discusses Roblox stock and breaks down the potential for AI to improve the companies revenue.

Video Transcript

SEANA SMITH: But let's get to it. Ticker to Roblox, DA Davidson reiterating a buy rating on the stock and a $55 price target, making the case that Roblox could benefit from generative AI. Now, analyst Franco Granda saying that he's making the case that Roblox could boost its revenue, Roblox's revenue by over 5% in 2024 from implementing the AI technology. While the timing, though, is still unclear, he does see it as a growth catalyst for several years.

Now, in terms of what we know for Roblox's AI ambitions, they have launched their first two tools in regards to AI. They're called the Code Assist, and also the material generator. Both are in beta right now. Roblox's stock, though, has been on a wild ride this past year. Recent data, though, showing that user base is growing. Daily active user gains the highest that they have been in February over the last five months. So Roblox needed something maybe, Josh, to stabilize the wild swings that we were looking at, at that chart right there. AI, if any company mentions it, it seems like investors latch on to that. So we'll see whether or not it works for Roblox.

JOSH SCHAFER: And Roblox has rode the metaverse wave as well we should mention, right, with the stock and sort of getting a boost from that. So, interesting now to see them getting into AI. Of course, it fits with the metaverse play. That also fits with what Roblox does. So certainly interesting to see. And Seana, you pointed, too, to just sort of the natural fundamentals we're seeing from Roblox starting to pick up a little bit, too. Wedbush noted that last week as well, saying bookings have met their estimates for the last three months now. So maybe starting to see a little bit more consistency in what's been a little bit of a volatile run there.

SEANA SMITH: Yeah, it certainly has been a very volatile run. And I think a lot of people are just trying to figure out what exactly a name like Roblox. It is consumer facing, remember that. So at a time when the macroeconomic environment, the landscape there continues to slow, that, of course, could have an impact on Roblox, too, at least in the near term.