Stock Analysis & Ideas

Roblox (RBLX) Q3: Is User Growth Enough to Catapult this Stock?

Story Highlights

Roblox is slated to release its Q3 earnings results on November 9, ahead of which analysts are cautiously optimistic. The company revealed strong user growth numbers for September which definitely might have bode well for the company, but a few concerns still remain.

Roblox (NYSE:RBLX) is on deck to report third-quarter 2022 results on November 9 before the bell. Last month, in a preliminary look into September’s performance, Roblox announced solid numbers that indicated user growth. However, there were certain concerns about users that were hard to miss, so RBLX stock might not climb on its Q3 results.

What Q3 Might Have Looked Like

Wall Street estimates the online entertainment platform provider will report a non-GAAP loss per share of $0.31, which is almost 154% wider than the prior-year quarter’s loss. However, the consensus revenue forecast of $686.3 million is about 8% higher year-over-year.

The company has missed earnings estimates for the past few quarters. Let’s take a look at whether Roblox can meet or beat expectations this time.

Prima facie, Roblox’s September quarter performance appears to have been solid. Roblox witnessed strong user growth in September, and customers spent more time on its games. The company clocked 57.8 million daily active users in September, up 23% year-over-year. Moreover, the 4 billion hours of engagement in September showed an increase of 16%, year-over-year. These numbers are expected to have given a boost to the overall third-quarter performance.

Nonetheless, the company also revealed that the average bookings per daily active user dropped between 7% and 10%. This is likely to have weighed on the quarterly performance.

In the same announcement, Roblox also noted that bookings were adversely impacted in the quarter by the strengthening of the U.S. dollar against other foreign currencies during the course of the year. Foreign currency headwinds have possibly impacted the September bookings growth rate by approximately 6% year-over-year.

Is Roblox Stock a Buy or Sell?

Analysts are cautiously optimistic ahead of the Q3 print, with a Moderate Buy consensus rating based on eight Buys, six Holds, and three Sells. The average price target for RBLX stock is $43.2, indicating an 8.49% upside.

Parting Thoughts

Roblox might have had better-than-expected user growth in September, but there are several concerns as well. Nonetheless, with a market cap of $24.22 billion, it is a well-capitalized company that is likely to pull through near-term headwinds.

Disclosure

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