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Why Roblox Stock Crashed Today

What happened

Shares of Roblox (NYSE:RBLX) plunged 26% on Wednesday after the game development company reported disappointing fourth-quarter results. 

So what

Roblox’s revenue soared 83% year over year to $568.8 million. The gains were fueled in part by a 33% increase in average daily active users (DAUs) to 49.5 million, and a 28% increase in hours engaged, to 10.8 billion.

Still, growth in the video game platform’s bookings, which equates to the amount of virtual currency users bought during the quarter, continued to decelerate. Bookings rose 20%, compared to 28% in the third quarter and 35% in the second quarter. 

Worse still, Roblox delivered a larger-than-expected net loss of $0.25 per share. Wall Street’s estimates had called for a loss of only $0.13. 

Two people are looking at a declining stock chart.

Image source: Getty Images.

Now what 

Roblox expects a further deceleration in its growth in the first quarter of 2022. The company said its revenue growth slowed to roughly 65% in January, while its bookings rose just 2% to 3%.

That sparked concerns among analysts and investors, who have begun to question whether Roblox can continue to expand at a blistering pace when the pandemic subsides. “Once stuck-inside kids and teens are now spending weekdays off their devices and out in the real world,” Jefferies analyst Andrew Uerkwitz said. That could be a problem for a game platform that relies on player engagement to drive its growth.

It should be noted, however, that today’s decline has driven Roblox’s shares well below its initial trading price of $64.50 on March 10, 2021, the day of its direct listing. So it’s possible that Roblox’s slowing growth rates are now reflected in its fallen stock price.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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