Amid a down day for the market following the midterm elections, video game development platform Roblox (NYSE:RBLX) heaped on the red ink, with shares declining 14% in the morning session before extending the pain into the early afternoon hours. RBLX stock suffered from a mixed earnings result along with concerns about meeting underlying lofty expectations.
For the third quarter, Roblox delivered a loss on earnings per share of 50 cents. This figure compared very unfavorably to expectations of an EPS loss of 35 cents, per data from Refinitiv. However, Roblox rang up $702 million in what the company terms bookings. In contrast, covering analysts pegged this line item to hit $686 million.
According to CNBC, the “revenue figure is what Roblox calls bookings, which include sales recognized during the quarter and deferred revenue. Bookings rose by 10% year over year.” Also, the business news agency reported that the company “generates revenue from sales of its virtual currency called Robux, which players use to dress up their avatars and buy other premium features in the games.”
Another factor that fundamentally helped Roblox centered on average daily active users (DAUs), which hit 58.8 million. This tally represented a 24% lift from the year-ago period. Also, it exceeded the 52.2 million count in Q2. Unfortunately for RBLX stock, the underlying company also stated that average bookings per DAU slipped 11% year over year to $11.94.
RBLX Stock Encounters Credibility Challenges
As expected, Roblox’s management team put on a brave face. “We are delivering strong growth across our core operating metrics, powered by a growing developer community creating high-quality experiences that appeal to a broad, global audience,” said CEO David Baszucki.
However, this growth must translate into dollars to bolster RBLX stock. Hence, the average bookings per DAU imposed a tough perspective on the overall business. To be fair, Roblox stated in a letter to shareholders that “it expects fourth-quarter bookings to reach a new peak as it tries to attract users between the ages of 17-24, who spend more money on the platform,” per Barron’s.
The business and investment resource wrote that Roblox’s age range now represents 22% of DAUs on the platform.
However, some analysts remain skeptical about RBLX stock. “Roblox is still regarded as a platform primarily for children and our experts believe Roblox is still a long way from meaningfully engaging with the 17-24-year-old cohort,” said Nicholas Cauley, an analyst at Third Bridge.
As well, it’s important to keep in mind that RBLX stock benefitted cynically from the coronavirus pandemic. Many kids spent more time on digital devices while sheltering in place. However, with society largely returning to normal, Roblox may lose some relevance.
Certainly, the market doesn’t seem too impressed with the company’s reassurances. Since the start of the year, RBLX stock has dropped a staggering 67% in equity value.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.