Why Roblox Stock Was Hot With Investors This Week

A fresh, and quite bullish, analyst note on Roblox (NYSE: RBLX) was a major catalyst lifting the online video game company's stock over the past few days. With that gust of wind at its back Roblox's stock was enjoying a nearly 18% gain week to date as of late Thursday evening, according to data compiled by S&P Global Market Intelligence. In fact, the shares notched a new year-to-date high that day, at nearly $59 per share.

A record run

Roblox already had good momentum going into the week. Just before Thanksgiving it announced a special deal on Robux, its proprietary, in-game digital currency. In a message posted on its Creator Forum, the company said it is offering users discounts up to 25% when purchasing Robux via the company's gift cards, its app, or its website.

This is a sensible move to push out middlemen such as Apple and Alphabet, which typically take chunky cuts of every sale made through their app marketplaces. Investors traded Roblox stock up on that news.

This was compounded by that new research note, which was published toward the end of the week by Raymond James pundit Andy Marok. He raised his price target on Roblox slightly, from $60 per share to $63, but in doing so reiterated his strong buy recommendation. That booster shot of confidence came at a time when investors were already bullish on the company.

Continuing to spill red ink

Roblox undoubtedly has great potential as a business, as its online gaming environment is an irresistible hit -- particularly with children of varying ages. Yet the company continues to book bottom-line losses, and it's well past its early stages now. In my view, management needs to prove that it can at least occasionally earn a buck in order to make its stock a compelling buy.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Eric Volkman has positions in Apple. The Motley Fool has positions in and recommends Alphabet, Apple, and Roblox. The Motley Fool has a disclosure policy.