Roblox Downgraded to Sell as Jefferies Calls Rally Overdone

Roblox just got a reality check from Wall Street. Jefferies downgraded the online gaming platform to Underperform from Hold on Monday, arguing the stock's 30% rally since second-quarter earnings has run well ahead of what the underlying business actually supports.

The firm kept its price target at $38, which implies roughly 18% downside from Friday's close near $46. That's a notably bearish call on a stock that's been one of the market's better momentum names lately — shares are up nearly 28% over the past month alone, according to trading data compiled by MarketBeat.

Analyst James Heaney isn't dismissing Roblox's growth story entirely. He said he supports the company's push into new game genres and its move to open the platform to adult users. His concern is about pacing and cost, not direction.

"We believe the improvement in US & Canada user and bookings growth will be longer and more costly than the market expects." — James Heaney, Analyst, Jefferies

The numbers behind that view are worth sitting with. Daily active users in the U.S. and Canada climbed from about 20 million in early 2025 to a peak of 26 million in the third quarter of 2025, but Jefferies says a lot of that growth came from viral hits like "Grow a Garden" and "Steal a Brainrot" — games that pulled players in fast and lost them just as quickly, as Investing.com reported on the note.

Roblox's newer content algorithm is designed to favor games that retain players longer, which Jefferies thinks will actually slow near-term user growth even as it (hopefully) improves quality over time. The firm is modeling just 5% bookings growth for fiscal 2027 — well under the 13% Wall Street consensus — and has cut its FY27 EBITDA estimate by 21%.

Heaney's sharpest concern is about spending discipline. He drew a direct comparison to Meta's 2017-2019 stretch, when the social media giant plowed money into new initiatives while revenue growth cooled, squeezing margins along the way.

Roblox, in his view, is walking a similar path: raising payouts by 42% for U.S. in-game spend from players 18 and older, ramping infrastructure spending for AI model training, and pushing into new verticals like "Roblox Everywhere." Jefferies doesn't expect EBITDA margin expansion to show up until fiscal 2028 — a full year later than some bulls are hoping for.

The counterpoint bulls will make: Roblox has genuine platform expansion underway, and if the new algorithm succeeds at building a stickier, longer-tenured user base, the near-term growth slowdown could prove worth it. A single downgrade from one firm, even a well-regarded one, isn't gospel — Roblox still carries plenty of Buy ratings elsewhere on the Street.

For investors holding RBLX, the practical move here isn't necessarily to sell outright, but to reset expectations for the next few quarters. If bookings growth prints closer to Jefferies' 5% estimate than the Street's 13% consensus in upcoming reports, that's the confirmation signal the bear case is playing out. Watch the next earnings print closely for U.S. and Canada DAU trends specifically — that's the metric Heaney is flagging as the real tell.

If you're looking to add exposure rather than trim it, $38 — Jefferies' target — is a level worth watching for a more attractive entry, rather than chasing the stock at current levels after a 30% run.

Bottom line: Roblox's story hasn't broken, but the stock priced in a best-case scenario, and Jefferies just bet that reality will show up first.