Roblox's (RBLX) new age verification system is posing greater challenges to engagement and monetization than previously expected, Morgan Stanley analysts said in a Friday note.

Analysts said they had expected age verification to pose a manageable headwind for Roblox, but the company now has to execute through the aftershocks of weaker engagement and spending.

Morgan Stanley said, however, that the age verification headwind can be fixed and is within the company's control.

Analysts said that the company's newly announced Roblox Reality is "arguably the most ambitious deployment of genAI for game creation anywhere to-date," a testament to the company's leadership in that area.

Analysts retained an overweight rating on the stock, but lowered its price target to $62 from $140.

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