What happened
On yet another tough day for tech stocks, with the Nasdaq down 1%, Roblox (RBLX 2.10%) stock fell harder than most.
Shares of the online gaming platform plummeted 6.5% through close of trading Thursday, then continued to fall after-hours -- and you can blame Jefferies for that.
Image source: Getty Images.
So what
In a note covered by TheFly.com today, Jefferies lowered its price target on Roblox shares by $10, to just $50 a share. And yes, Roblox stock now costs closer to $40 than to $10, but Jefferies still isn't recommending buying. Why is that, exactly?
Jefferies rates Roblox stock a hold, citing disappointing numbers on "user engagement and bookings per user hour," says TheFly. On the one hand, the analyst observes that Roblox management itself is optimistic about its prospects over the medium to long term -- and that Jefferies is "cautiously optimistic" over that timespan as well.
That being said, in the nearer term Jefferies maintains "below Street estimates" for Roblox's sales and earnings. The analyst warns that for the next quarter at least, and perhaps even longer, Roblox will be reporting numbers that compare unfavorably to its performance earlier in the pandemic, when more kids were out of school, at home, and gaming instead of studying.
Now what
Sad to say, this appears to be a popular opinion on Wall Street. On the one hand, consensus forecasts currently call for Roblox to grow earnings by a respectable 32.5% in the first quarter of 2022, and to cut its losses in half (to $0.22 per share).
Farther out, however, the forecast is for continually slowing growth, to the point that by year-end, we could find that Roblox grew sales as little as just 11% for all of 2022 -- and continued to lose money (perhaps as much as $0.83 per share).
I have to say, that's not an optimistic forecast at all. It does, however, suggest that Jefferies' cautious hold rating on Roblox stock may be the right call.
