Roblox stock: Industry expert explains why Wall Street is wrong

Published 05/10/2024, 07:05 AM
© Riccardo Milani / Hans Lucas via Reuters Connect

Roblox’s latest quarterly earnings release resulted in the stock plunging over 22% in Thursday’s session as the company’s bookings guidance disappointed. 

However, one industry analyst said the focus should be on the long-term, not the immediate numbers.

Roblox sinks on guidance

While its booking outlook disappointed, Roblox reported first-quarter financial results that surpassed analyst expectations for earnings and revenue. The company announced a Q1 loss per share of -$0.43, which was $0.10 better than the analyst estimate of a -$0.53 loss per share. 

Revenue for the quarter reached $801.3 million, exceeding the consensus estimate of $769 million and marking a 22% increase YoY. Q1 ​bookings grew 19.4% YoY to $923.8 million, within the company's guidance range of $910 million to $940 million.

The company's guidance for second-quarter bookings between $870 million and $900 million fell short of the analyst consensus of $902.5 million, driving a significant stock price decline. Looking ahead to the full year of 2024, Roblox expects bookings to range from $4 billion to $4.1 billion.

Investors reacted negatively to the bookings guidance, overshadowing the first-quarter revenue and earnings beat, as reflected in the significant drop in Roblox's stock price.

Industry expert defends Roblox

However, Yonatan Raz-Fridman, CEO and founder of Supersocial, disagrees with the Wall Street assessment of Roblox’s quarterly earnings.

Supersocial is a Roblox leading developer in virtual world experiences for brands including Walmart (NYSE:WMT), Universal Music Group (AS:UMG), e.l.f. Beauty (NYSE:ELF) and more.

Raz-Fridman argues that “as a developer, it’s not all about monetization, but potential.”

“We are seeing daily active users increase in the millions, people are spending more time on the platform and more than 50% of those people are over 13,” he says. “With young users, you see slower spending and booking increases, but the future purchasing power of this Roblox-native generation is massive.”

Raz-Fridman is not concerned about monetization yet, noting that it is still a new industry and a brand new avenue for both brands and users to consider how they spend. Furthermore, he feels that Roblox has positioned itself uniquely.

“We need to focus on building a passionate community and get it right, and then identify the most effective paths to profit within that established system,” the Supersocial CEO contends. “Wall Street and developers have different priorities. While earnings reports are important predictions of a company’s success, as a developer, we are focused on the long-term, not the immediate numbers.”

The growth in daily users and active engagement were highlighted as positive factors that the company wants to see, adding that the increases in emerging markets also show promise. 

“We never expected the same level of monetization so quickly and are confident the work we are doing with top brands will not only continue to increase Roblox’s loyal following but establish a precedent for profit in the metaverse that will only solidify further as its main user base ages and secures more purchasing power,” declares Raz-Fridman.

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