Roblox Earnings News: RBLX stock falls on earnings miss

Roblox (RBLX), a major metaverse contender, reported earnings after the close on Tuesday, and the initial reaction was poor. This is not surprising given bears are lining up everything in their sights at the moment and using any excuse to knock share prices lower. Roblox had already been under pressure – another pandemic darling stock and another colossal loss for 2022. Expectations going into earnings then were not high.

Roblox Stock News: Back to school is bad for platform

Roblox announced Q1 earnings per share (EPS) coming in at $-0.27 versus estimates for $-0.19. Revenue was $631 million versus $639 million expected. Daily active users (DAUs) were 54.1 million. This was a miss on top and bottom lines, and the stock initially fell sharply, down about 12% at one stage in Wednesday's afterhours market.

"We remained focused on delivering our innovation roadmap to unlock the full potential of the Roblox platform and drive long-term returns for investors," said CEO David Baszucki. If anyone can translate this sentence for me, please go ahead! Talk about being vague.

Roblox is dependent on kids for income. Kids who pester their parents into buying them Robucks, the currency of the platform. Kids then spend this money on various items for their avatar or on other items within the Roblox universe. The big problem with all this is Roblox is dependent on parents not getting sick of the platform and pulling the plug. Daily active users can do all they want, but if those users are aged between about five to 10 years old, they are not exactly awash with cash.

Sure, during the pandemic parents would indulge their kids who were locked at home. Now that life is back to normal, schools and sports are back on, it is inevitable that time spent on the platform per user will diminish. Parents will spend their money on other activities they see as more important for their children. I am speaking from experience here! Bookings are the metric used to quantify purchases of Robucks, and this fell 3%. Expect this decline to continue.

Roblox also released April numbers that showed an acceleration in the decline of bookings, or purchases of Robucks, to you and me. These fell nearly 10% in April, and bookings per user fell 25%. This is significant. 

Roblox Stock Forecast: Pandemic valuation the problem

A great premise during lockdown, but like many lockdown favorites the valuation just went way too high. Now it is coming some way back to normality, but unfortunately it probably has more downside. These numbers are not encouraging: users are growing, but revenue is falling, and bookings per user are falling. 

$30 is the bearish pivot on the chart. Above and Roblox is neutral technically. This is also the 9-day moving average. Risk appetites may return slightly if Wednesday's CPI is not too surprising, so high risk names may see a dead cat bounce in the region of 10%. Do not expect the longer-term narrative to change though, both for Roblox and the broader equity market. More pain for both is ahead.

Roblox (RBLX) chart, daily

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