Roblox: Strong results catapult the company upwards

Roblox didn’t disappoint this time. Its 3Q 2023 results were definitively strong with bookings of US$840 million exceeding expectations of US$822 million. Roblox registered a revenue of US$713 million for the quarter, a 4.8% increase from the previous quarter. Share price gained by 18.1% on the day that the results came out, and 37% since the beginning of the year.

However, Roblox continues to record losses, with a loss of US$279 million for the quarter. Roblox has accumulated a whopping total loss of US$2.7 billion over the course of its lifetime. This will not faze Roblox as it continues to invest a big sum of money into research and development (US$322 million), and infrastructure and trust & and safety (US$219 million).

Why this matters to you: Roblox has quickly become the go-to platform for many younger viewers and creators, and there aren’t any competitors out there. These strong results reinforce Roblox’s position in the gaming and entertainment market,

Target: Earnings beat expectations by 42%

Target’s earnings beat expectations big time in the latest 3Q 2023. Earnings per share beat expectations by 42% with actual at US$2.10 and expected at US$1.48. The weird thing is that revenue only beat expectations by 0.6% at US$25.4 billion. So what is the big contributor to a sharp improvement in its profit margins? Gross profit margins are higher at 5.2% in 3Q 2023 compared to 3.9% for 2022.

This reflects mainly lower transportation and inventory-related costs. Freight rates (which are the cost of shipping containers and trucking) came down significantly from last year. Meanwhile, lower inventory-related costs just mean that they have fewer inventories. Target has guided for EPS of US$1.90 to US$2.60 in 4Q 2023, and markets have the company at an Overweight call and target price of US$150. The implied upside is 15.5% from a current share price of US$130.

Why this matters to you: Target is the proxy to consumer sector in the U.S. If it’s doing well, it means that consumer spending is trudging along well.