Roblox Stock: Declining Bookings Raise Concerns, Says Analyst

Shares of Roblox (NYSE: RBLX) were down 4.8% in pre-market trading on Thursday as the online gaming developer announced key metrics for the month of May, which were not particularly encouraging.

Roblox announced that its estimated bookings in May came in the range of $196 million and $199 million, a decline of 9% to 11% year-over-year. Even so, the estimated average bookings per daily active user dropped between 23% and 24% year-over-year.

The company pegged the slowdown in bookings to the adverse impact of a strengthening U.S. dollar against all major currencies. Roblox admitted that this impact “is more pronounced in May compared to prior periods in 2022,” and estimated that this currency fluctuation dragged down its bookings year-over-year growth rate in May by around 4%.

Bookings is an important metric for the company, defined as “revenue plus the change in deferred revenue during the period and other non-cash adjustments.”

Wedbush analyst Nick McKay was left disappointed with the May metrics and termed them “underwhelming.”

Considering that RBLX’s bookings took a hit in May due to foreign currency fluctuations, the analyst remained concerned that RBLX “does not hedge against F/X [foreign exchange] fluctuations,” which could be “a potential headwind for future periods.”

Besides the bookings figures, the analyst was also concerned with the drop in daily active users (DAUs).

While RBLX’s DAUs went up 17% year-over-year to 50.4 million in May, according to analyst McKay, this was still a month-over-month drop of around 2.7 million users from April. The analyst is of the view that this suggests “that Roblox may be a less compelling outlet for entertainment given the return-to-normal and the ramp of the current-gen console installed bases.”

The analyst added that this drop in users follows a quarter-over-quarter fall in Average Bookings per DAU (ABPDAU) to $11.67 in Q1 from $15.57 in Q4.

Analyst McKay is positive about “Roblox’s first mover advantage, its large user base, its technology stack, and the potential for M&A,” but remains concerned about its metrics in the month of May, its “younger” user base, “high platform fees,” and a higher level of investment.

As a result, the analyst remained sidelined on the stock with a Hold rating and a price target of $28, which implies a downside potential of 3.1% at current levels.

Other analysts on the Street, however, are cautiously optimistic about the stock with a Moderate Buy consensus rating based on nine Buys, six Holds, and two Sells. The average RBLX price target is $38.25, which implies a 32.4% upside potential to current levels.

Bottom Line

Given Roblox’s disappointing key metrics for the month of May, analysts are adopting a wait-and-see approach.

Interestingly, the TipRanks Crowd Wisdom tool indicates that the top investors on TipRanks are neutral about the stock with 0.1% of the best-performing portfolios on TipRanks reducing their holding of the stock in the past 30 days.

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