Why Roblox Stock Plunged 20% on Thursday
Guidance is one of Roblox’s problems. There is also another evaluation that is too expensive.
Share of online gaming platforms Roblox Corporation (RBLX -21.98%) It was down 21% as of 10:35 a.m. Thursday, despite both sales and profits being weak this morning.
Ahead of its Q1 2024 report, analysts predicted that Roblox would lose $923 million in quarterly bookings, or a loss of $0.53 per share. (Roblox’s reservations, as a proxy for revenue, are comprised of sales of Robux, a virtual currency that will eventually be spent and converted into revenue.) In fact, Roblox’s loss was only $0.43 per share, and its reservations amounted to $923.8 million, barely meeting expectations. I went overboard.
How bad were Roblox Q1 earnings?
So Roblox’s report isn’t entirely without good news. Sales for the quarter increased 22% to $801.3 million. Bookings are up 19% year over year. The number of daily active users increased by 17%, and total time spent on the website increased by 15%.
The net loss, while significant, was less than feared and slightly lower than the $0.44 per share Roblox lost a year ago. “We are operating more efficiently,” explained CFO Michael Guthrie.
Is Roblox stock a sell?
But if that’s all true, why is Roblox down today, and why is it down? too many? Well, the instructions appear to provide part of the answer.
The fact that bookings have grown more slowly than revenue already signals slowing future revenue growth for Roblox, which isn’t a good outlook for a promising growth stock. Roblox said its second quarter revenue will increase from the first quarter, from $855 million to $880 million. Of greater concern is the fact that management is saying bookings will only amount to $870 million to $900 million. This is less than what Roblox reported in the first quarter. many That’s less than the $934 million in reservations Wall Street promised Roblox.
Ultimately, Roblox will need to grow faster to justify its current valuation of about 79 times free cash flow. Growth in the mid-teens or even below the 20th percentile alone is not enough to reduce this. And until Roblox shows it can grow faster, the stock price will fall further.
