What happened
Shares of Roblox (RBLX -0.59%) are jumping today, up by 8% as of 11:15 a.m. ET, compared to a 1% spike in the S&P 500. The rally didn't do much to erase losses that investors have seen in the stock lately, which remains down by over 50% so far in 2022.
The move higher came as Wall Street expressed more optimism about the economy and Roblox's upcoming earnings report.
So what
The main factor driving the gaming platform provider's stock up on Tuesday was the broader market's rise. The Nasdaq Composite, home to many beaten-down tech stocks, climbed by over 1% and many digital entertainment specialists, including Netflix and Roku, jumped by 5% or more.
The next few days will bring a flood of tech earnings reports, and investors are gaining confidence that these announcements might show solid sales results despite pressures like inflation. Roblox seemed to benefit from that general upswing in market sentiment.
Now what
Roblox announces its Q3 operating results on Nov. 9, and investors will be watching that report closely for any signs of an impending return to growth. While more users are flocking to its gaming platform, average bookings per user fell by between 7% and 10% in September, the company said in mid-October.
The stock's gains in the last few weeks reflects the judgment by many on Wall Street that its sell-off has been overdone. Roblox is growing users and seeing strong engagement, after all. Yet the shares might remain under pressure until the company can show that it is at least moving toward profitability.
That rebound hasn't shown up in recent results. Instead, operating losses have expanded to $322 million from $279 million in the first half of 2022. An end to that trend might convince investors to be even more optimistic about Roblox stock in a few weeks.
