Roblox started with buy at Citi, firm says it's 'safe to enter the metaverse'
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Roblox (NYSE:RBLX) shares rose in premarket trading on Thursday, as Citi started coverage on the gaming platform with a buy rating, noting that earnings estimates are now "reasonable."
Analyst Jason Bazinet put a $59 price target on Roblox as part of initiating coverage on the name, noting that the company's valuation is justified by its "strategic position, rapid growth and healthy pipeline of product enhancements."
"Like many stocks, Roblox benefitted from COVID," Bazinet wrote in a note to clients, adding that 2023 bookings estimates fell to $3.6 billion from $4 billion following the fourth-quarter miss.
"We believe these lower estimates are now achievable even without the benefit of product enhancements."
Roblox (RBLX) shares rose slightly more than 1.5% to $46.64 in premarket trading.
Bazinet also noted that Roblox (RBLX) has gone after three "noteworthy" acquisitions in the past six quarters, including Loom.ai, which does facial animation; Bash Video for video conferencing; and Guilded, for voice and text communications, similar to Discord. 
The company is also testing an accessory fitting tool for clothing and accessories, customized material software and volumetric sound and spatial voice, all of which leads the analyst to believe the company's pipeline is "robust."
Bazinet believes that one of Roblox's (RBLX) daily active users is worth roughly $200, which would be well below the $515 that Wall Street is valuing them at and well above the ratio of other subscription services such as Netflix (NFLX), Spotify (SPOT) or SiriusXM (SIRI), which have a ratio of about 1, compared to 2.5.
"As such, investors are underwriting more than a doubling of Roblox user base or a doubling of the economic value per sub," Bazinet wrote, adding that the premium is "justified" due to Roblox's two-sided marketplace, its revenue growth and recent user and booking trends.
On Friday, Roblox (RBLX) said it was supporting Apple (AAPL) in the tech giant's antitrust fight against "Fortnite" maker Epic Games, noting that the App Store is beneficial to users.