Roblox Corp (RBLX) is turning its virtual sandbox into a serious bet on the future of gaming, and at least one Wall Street analyst thinks the company's best days are ahead. The question isn't whether kids love building digital worlds—they clearly do—but whether that enthusiasm can translate into the kind of cash flow that justifies a premium valuation.
B. Riley Securities analyst Drew Crum thinks the answer is yes. He initiated coverage on Roblox with a Buy rating and a price forecast of $125, suggesting the stock could climb more than 30% from where it closed on December 4. That's a bold call after the shares already took a roughly 30% tumble recently.
Crum's thesis hinges on something that sounds almost too good to be true: Roblox has built network effects that rival Alphabet Inc.'s (GOOGL) YouTube ecosystem. The platform isn't just a game—it's a self-reinforcing cycle where social connections and content creation feed off each other, keeping users engaged and developers motivated.
When Virtual Gardens Grow Real Revenue
The viral explosion of "Grow a Garden" and other breakout hits proves that Roblox can regularly deliver experiences that capture massive audiences. Seven titles topped 10 million daily active users in the third quarter of 2025 alone. That's not luck—that's a platform humming along with the kind of content velocity that creates more hits over time.
The secret sauce? A large developer community that's easy to join and generous payouts that keep creators coming back. This virtuous cycle accelerates both the quantity and quality of content, which in turn attracts more users, which attracts more developers. Rinse and repeat.
Crum expects Roblox to sustain bookings growth above 20% annually. The platform already hosts tens of millions of daily users and recently generated over $4 billion in bookings, but he sees substantial upside from here. Why? Most users aren't paying anything yet. As the user base ages up and new advertising and direct-payment options roll out, average revenue per user should climb meaningfully.
Investing Now to Print Money Later
There's a catch, of course. Management is aggressively investing in trust and safety measures, artificial intelligence capabilities, and infrastructure upgrades. That's squeezing margins in the near term, which makes some investors nervous.
But Crum views these investments as strategic necessities rather than wasteful spending. You can't scale a platform serving millions of kids without serious safety systems, and you can't stay competitive in gaming without AI. He's modeling healthy Covenant adjusted EBITDA growth with margins expanding into the mid-20% range by the end of his forecast period.
On valuation, Crum argues that Roblox deserves a premium multiple given its unique market position and growth trajectory. The company is chasing 10% of a $180 billion video game market, and if it gets anywhere close, today's valuation will look cheap in retrospect.
He recommends investors initiate or add to positions following the recent selloff, calling Roblox a core holding for anyone seeking high-growth exposure in interactive entertainment. For the fourth quarter, Crum projects revenue of $2.04 billion and adjusted EBITDA of $546.4 million.
Roblox shares were down 1.69% at $97.33 on Wednesday.