Roblox Stock: Citi’s Buy Rating vs Safety Risks

Citi’s recent upgrade of Roblox’s price target from $152 to $155 per share represents a significant vote of confidence in the company’s near-term prospects. The analysts opened a 30-day ‘upside catalyst watch’ ahead of Roblox’s October 30 earnings report, betting that strong Q3 results will accelerate a rebound from the stock’s recent 17% decline from its September peak. This optimism stems from proprietary RoMonitor data showing robust Q3 trends, with daily active users and session lengths exceeding expectations. Citi anticipates Roblox will surpass its own guidance of $1.6 billion in bookings and approximately $200 million in adjusted EBITDA, potentially leading the company to raise its full-year guidance.

The fundamental case for Roblox remains compelling. The platform has evolved from a simple developer tool in 2006 into a global phenomenon driven by user-generated content and a virtual economy utilizing Robux for in-game purchases. With 111.8 million daily active users—mostly under 16 years old—and international users now comprising nearly 70% of the total, Roblox has demonstrated remarkable ecosystem resilience. Creator payouts have surged 40% year-over-year, exceeding $1 billion annually, proving the company’s economic flywheel is functioning effectively. Second-quarter bookings rose 51% to $1.4 billion, beating estimates, though losses widened to $278 million from $206 million a year earlier as 24% expense growth outpaced 20% revenue increases.

Despite Citi’s bullish stance, Roblox’s valuation presents a significant concern for investors. At 12x 2025 sales, the stock trades well above its historical average of 8x sales, assuming the company can maintain its current 25% growth rate. This premium valuation becomes particularly notable when compared to peers like Unity (NYSE: U), especially given Roblox’s negative adjusted EBITDA margins resulting from heavy R&D spending on safety measures and AI development. The current $125 share price reflects both optimism about future growth and skepticism about the company’s path to profitability.

Wall Street sentiment toward Roblox remains divided. While Citi’s analysis aligns with broader consensus support, several prominent firms maintain negative outlooks. MoffettNathanson has maintained its sell rating and $77 price target since February, expressing concern about Roblox’s monetization hurdles. Similarly, Weiss Ratings and Cowen analysts have recently reiterated their negative perspectives. This divergence highlights the uncertainty surrounding Roblox’s ability to translate its massive user base into sustainable profitability, particularly as the company continues to invest heavily in international expansion and advertising revenue pilots.

Perhaps the most significant risk factor for Roblox investors involves the platform’s ongoing child safety challenges. Despite being touted as kid-friendly, Roblox faces mounting legal and regulatory scrutiny. In August, Louisiana sued the company, alleging the platform is ‘overrun with harmful content and child predators’ and accusing Roblox of prioritizing profits over safety. The lawsuit claims users can easily access unsafe roleplay ‘condo games’ and that grooming occurs through unverified accounts—a particularly concerning allegation given that 40% of Roblox’s users are under 13 years old.

The scale of the safety problem appears to be growing. Reports to the National Center for Missing & Exploited Children doubled in the first half of 2025 to nearly 24,000, covering cases of enticement and exploitation. An April study by Revealing Reality found ‘deeply disturbing’ risks, including stranger chats that bypass parental controls. While Roblox has rolled out AI safety tools like Sentinel and age estimation technology, critics including California Representative Ro Khanna argue these measures remain insufficient. The negative headlines have already impacted the stock, shaving 5% off shares in August alone, and ongoing lawsuits from families and states could trigger substantial fines, user exodus, or regulatory restrictions on monetization.

For investors considering Roblox at its current $125 price, the decision hinges on balancing near-term catalysts against long-term risks. Citi’s analysis suggests strong Q3 earnings could quickly push shares toward $140, approaching their $155 price target. The company’s massive user base, $5-6 billion annualized bookings run rate, and international expansion provide a solid foundation for continued growth. However, the combination of premium valuation and safety overhangs demands careful consideration.

Conservative investors may view Roblox as a hold at current levels, preferring to wait for clearer signs of profitability improvement and resolution of safety concerns. More aggressive portfolios might find the stock appealing, particularly if they believe 2026 could represent an inflection point for profitability. The key near-term catalyst will be the October 30 earnings report—strong results that beat guidance could validate the bullish thesis, while disappointments could exacerbate the recent pullback. Ultimately, Roblox represents a high-risk, high-reward opportunity in the evolving metaverse space, where spectacular growth potential must be weighed against substantial operational and regulatory challenges.