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Why Roblox Stock Is Down By 24% Today

By:
Vladimir Zernov
Published: Feb 16, 2022, 16:28 UTC

The stock is trying to settle below the $55 level.

Roblox

In this article:

Roblox Stock Retreats After Disappointing Earnings Report

Shares of Roblox gained strong downside momentum after the company released its quarterly results.

The company reported revenue of $568.8 million and a GAAP loss of $0.25 per share, missing analyst estimates on both earnings and revenue. Importantly, the company’s bookings of $770.1 million have also missed analyst estimates. Average Daily Active Users (DAUs) totaled 49.5 million, up 33% on a year-over-year basis, while Hours Engaged grew by 28%.

The market expected better results from the company which is viewed as one of the leading metaverse plays by many traders. As a result, Roblox stock declined from $73 to $55.

What’s Next For Roblox Stock?

Roblox is in the growth phase, and the company is not expected to become profitable in the next few years.

Metaverse-related stocks have been moving lower in recent months. Meta Platforms is down by almost 45% from its peak that was reached back in September 2021, while Unity, the owner of a popular game engine, is down by almost 50% from the highs that were reached in early November 2021.

The key reason for the major pullback in many growth stocks is the rapid increase in Treasury yields and the anticipation of aggressive moves from the Fed.

In this environment, Roblox has to show strong growth to keep the bullish thesis alive. At the first glance, Roblox’s growth remains strong, as the company’s revenue increased by 83% on a year-over-year basis in the fourth quarter of 2021. However, it’s the market that decides whether the company’s growth is strong enough, and it is clear that traders expected better numbers.

In case the general market pressure on growth stocks continues, Roblox stock may gain additional downside momentum in the upcoming weeks. The company’s growth stays strong and Roblox will likely have many opportunities in the developing metaverse segment, but the near-term trend of its stock will change only if the market becomes less hostile towards unprofitable high-growth companies.

For a look at all of today’s economic events, check out our economic calendar.

About the Author

Vladimir is an independent trader and analyst with over 10 years of experience in the financial markets. He is a specialist in stocks, futures, Forex, indices, and commodities areas using long-term positional trading and swing trading.

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