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Is it game over for Roblox? RBLX stock crashes 27% post-earnings

Is it game over for Roblox? RBLX stock crashes 27% post-earnings
Elmaz Sabovic

The post-pandemic struggles and the overall slowdown in the gaming industry have significantly impacted many franchises, with Roblox (NYSE: RBLX) suffering the same fate after announcing Q1 earnings.

After the announcement, RBLX stock plummeted by an astonishing 27.49%, effectively reducing the price of RBLX shares from $39.03 to $28.03 in the pre-market.

RBLX stock 24-hour price chart. Source: Google Finance
RBLX stock 24-hour price chart. Source: Google Finance

Beating estimates wasn’t enough for Roblox

Roblox exceeded Q1 earnings and revenue estimates but saw a 27% stock drop due to a weak Q2 bookings outlook. Despite beating expectations with $801.3 million in revenue and $923.8 million in bookings, the projected $870 million to $900 million for Q2 bookings fell short. 

CEO David Baszucki highlighted efforts to boost growth rates, while CFO Michael Guthrie emphasized operational efficiency. For 2024, Roblox expects revenue between $3.45 billion and $3.525 billion and bookings from $4 billion to $4.1 billion. 

Despite positive metrics, investors reacted negatively to the Q2 outlook, causing the stock price to drop.

It’s becoming a noticeable trend in the industry during the ongoing earnings season that the market places considerable importance on a company’s outlook for upcoming quarters. Weaker-than-expected guidance has led to stock value declines for companies with much larger market capitalization than Roblox.

A fall from grace for Roblox?

The expected decrease in bookings for the upcoming quarter starkly contrasts the trend observed in previous years.

Eighteen months ago, Roblox achieved 208 million downloads in 2022, ranking third globally among iOS and Google Play devices.

Regarding revenue, Roblox ranked fifth among the highest-grossing mobile games in 2022, generating $861.86 million globally.

Whether Roblox manages to turn its fortunes around or if the declining trend persists in the upcoming quarters depends largely on its ability to adapt and innovate, thus increasing customer appeal and retention.

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