Please ensure Javascript is enabled for purposes of website accessibility

Is the Pandemic Boost Over for Roblox?

By Parkev Tatevosian - Jun 22, 2021 at 8:30AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The co-experience platform was a prime beneficiary of pandemic effects.

Kids flocked to the Roblox (RBLX -4.28%) application during the coronavirus pandemic. As schools switched to remote learning and most extracurricular activities were canceled, kids had much more free time to fill and turned to playing games on phones, tablets, and computers. 

Since the start of 2021, several vaccines have been proven effective against the coronavirus, and over 2 billion doses have been administered. That's proving effective in bringing down infections, hospitalizations, and deaths from the virus. As a result, economies in some countries are reopening and restrictions on gathering in schools and businesses have eased, giving kids less time to play games at home.

Does that mean the pandemic boost is over for Roblox? 

Two kids looking at a tablet.

Roblox reports a decline in daily active users. Image source: Getty Images.

A surprise decline in players 

The co-experience platform reports monthly results for its key metrics and on June 15, it reported a decrease in daily active users (DAUs) from the month before. DAUs fell from 43.3 million in April to 43 million in May. It was a startling development that sent share prices of the stock down by as much as 7%. Roblox was on a trajectory of rapid daily active user growth during the pandemic. Still, it should not have come as a total surprise, especially as U.S. states are quickly easing business restrictions and entertainment options increase outside of the home.

Further, the warmer weather means playing in the backyard, jumping in the pool, and going to the beach are viable alternatives to playing Roblox. The risk here is that over 50% of Roblox users are under the age of 13. As kids engage in various activities other than Roblox, there is a chance they'll forget about the app and disregard it altogether. Still, it's too early to come to that conclusion. 

When looking at the daily active user total year over year, it shows an increase of 28% from last year. And hours engaged were up 9% year over year and 1% from April. Overall, Roblox is still on a growth trajectory, although the figures are moderating.

Keep in mind, there are parts of the world where COVID-19 is still not under control. Low vaccination rates and more infectious variants could lead the pandemic to last well into 2022, if not beyond. The virus is unpredictable, and just because it's been heading in one direction doesn't mean it will continue. While the boost from the pandemic for Roblox will not be as large, it will be around for at least a little while longer. 

What this could mean for shareholders 

Investors who counted on the pandemic-boosted growth rate to sustain for the long term were too optimistic. The sell-off after the monthly metrics release has brought Roblox stock to a forward price-to-sales ratio of 18.8, down from over 22.  

Kids are notorious for obsession with something for a little while and then forgetting about it completely. However, this is just one data point, and too much should not be read into it. Investors should keep an eye on gaming trends and observe their direction over time. If the drop-off for Roblox accelerates over several quarters, then it could be time to evaluate your position in the stock

 

Parkev Tatevosian has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Roblox Corporation Stock Quote
Roblox Corporation
RBLX
$48.96 (-4.28%) $-2.19

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
400%
 
S&P 500 Returns
128%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/16/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.