Roblox (RBLX) is expected to announce second-quarter results on Wednesday, August 9, before market opens, with a conference call scheduled for 8:30 am EDT. What to watch for:

NEUTRAL ON MARGINS: Wedbush notes that Roblox shares have been range bound for the last several months. Positive bookings momentum likely carried into Q2, particularly as younger users entered their school breaks, but investors remain cautious about profit contribution, the firm notes. Although Roblox is approaching more difficult comparisons in the second half of 2023, Wedbush believes there are multiple tailwinds to this momentum in the forms of aging up, higher potential penetration overseas and ads. The recent pullback in the share price is a consequence of Roblox choosing to exploit its first-mover advantage in the metaverse over scaling margins, the firm argues. The setup into results is positive, given the pullback and the visibility that the results call will provide. Wedbush expects management to reiterate its commitment to operating leverage and discusses its vision for newer products and AI. With the shares trading close to the firm's price target of $37, Wedbush keeps a Neutral rating on the name.

AI IMPACT: In a research note ahead of quarterly earnings, Truist raised the firm's price target on Roblox to $45 from $42, while keeping a Hold rating on the shares. The firm views the company's forward consensus bookings and adjusted EBITDA estimates as reasonable-to-low. Artificial intelligence should have a material impact on content creation for Roblox and a meaningful impact on the company's cost structure in the longer-term, Truist added.

The firm also notes that reports stemming from the Microsoft (MSFT)-Activision Blizzard (ATVI) regulatory hearings may suggest Sony (SONY) is increasingly amenable to bringing Roblox to the PS platform. Roblox is already on Xbox, which accounted for 1% of its users in 2022. Truist estimates Xbox to have accounted for at least 2% of Roblox bookings in 2022, given Xbox skews western/developed markets. The firm continues to expect Roblox to make its way to other platforms, including Switch, Oculus Quest (META), and Apple Vision Pro (AAPL), though again the incremental lift is likely to be fairly modest.

MORE BOOKINGS GROWTH: Keeping a Buy rating and a price target of $60 on Roblox shares, BTIG notes that Generative AI is likely to enhance ad adoption and bookings growth for the company after its recent demo of AI-driven improvements that are expected to reduce the barriers to creation. The firm also remains bullish on user growth potential and sees potential for nearly 100 million users on the platform and a high teens bookings CAGR long-term.

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