Shares of Roblox (RBLX -0.87%) fell 7.2% on Monday, compared to a 1.2% decline in the S&P 500. The slump wasn't unusual for the metaverse and digital entertainment platform provider; its stock is down over 60% so far in 2022.
It came as investors' fears rose about potentially bad news on the way from Roblox and its industry peers over the next several weeks.
Netflix will report its fiscal Q2 results on Tuesday, July 19, for example, and many investors are bracing for another round of bad news from the streaming video giant. Roblox isn't a direct competitor, but it is impacted by the same types of pressures that Netflix has noted in recent months, including waning enthusiasm for digital content. Roblox is seeing significant declines in spending on its platform, too, as bookings fell roughly 10% in May even though user engagement hours were up 10%.
If Netflix reveals more challenges in convincing people to pay for digital entertainment, then it is likely that Roblox will see those pressures continue, or even accelerate, into its fiscal second quarter.
Roblox will announce its Q2 results around mid-August, and investors don't have high expectations for that report. Stocks in the video game industry are generally underperforming the market in 2022, apart from Electronic Arts.
Roblox has been busy releasing new offerings aimed at increasing its audience, engagement, and monetization metrics. These include layered digital clothing, for example, and upgraded data centers in key international markets.
It's likely that these initiatives will support its growth, and Roblox still has a long runway for sales gains ahead as it builds on the current total of 50 million daily active users. But investors are fearful about weak short-term demand trends in the second half of 2022, and so the stock remained under pressure on Monday.