What happened
Roblox (RBLX -0.59%) shareholders trounced the market this week as the stock gained 28% through Thursday trading compared to a 3.3% surge in the S&P 500, according to data provided by S&P Global Market Intelligence. The move only erased a small portion of recent losses for the digital entertainment platform, though. It remains lower by nearly 70% so far in 2022.
The rally occurred as some investors saw a bargain in the stock, which is valued near an all-time low.
So what
Roblox hasn't made any official business announcements since its mid-June monthly sales snapshot. That release showed that the platform is still attracting more engagement and a higher volume of users. But spending by those users is falling sharply. Roblox is also losing users on a quarter-to-quarter basis.
Still, investors pushed shares higher this week, partly thanks to a rebound in many of the hardest-hit growth stocks. The Nasdaq index, home to many of these investments, soared this week to recover some of its lost ground in the past few trading sessions. Roblox stock should be expected to see relatively strong days in that type of environment, given its sharp declines since the end of 2021.
Now what
The metaverse entertainment specialist has attracted more buying interest as the stock price drops. That slump removes some of the risk around holding shares in this unprofitable business. Roblox's net losses grew to $500 million in 2021 from $266 million a year earlier, in fact. While that red ink should lesson over time, it has investors feeling nervous about the timing of that rebound.
Roblox's next operating update will be in mid-August when CEO David Baszucki and his team detail their plans for growth through 2022 and adjust their sales and earnings outlook.
Executives said back in May that they were planning to boost engagement and monetization through innovative launches including layered digital clothing. The next earnings report will show whether these improvements to the user experience are stemming the decline in user spending.
Without a rebound in that core growth metric, Roblox shares might not be able to build on the positive momentum that investors saw this week.
