What happened
Shares of video game platform company Roblox Corporation (RBLX 2.87%) crashed on Monday after the company published its latest monthly metrics. Management says this will be its final monthly update; it will only publish quarterly reports from here. And considering Roblox stock was down 12% as of 9:50 a.m. ET, shareholders might be glad to not deal with these monthly market reactions anymore.
So what
To be fair, Roblox stock is still up 41% year to date, even after this morning's slide. So this might just be a case of the market trying to figure out what this company is worth. After all, the monthly numbers for March weren't that bad.
Image source: Getty Images.
In March, Roblox had 66.2 million daily active users (DAUs) compared to 67.3 million DAUs in February. While DAUs dipped slightly, user engagement was encouragingly higher. Users were on Roblox 4.8 billion hours in March compared to 4.6 billion in February, even though there were over 1 million fewer active users.
So the market could be reacting to the slight drop in DAUs today. But again, it could just be that the stock was already up so much year to date, and now it's coming back down just a little as the market attempts to price in the company's performance in March.
Now what
For video game stocks like Roblox, investors need to understand the difference between revenue and bookings. Think of bookings as money used to purchase credits in a game ecosystem. The currency of Roblox is called Robux. In this case, revenue is only generated on an accounting basis once Robux are spent.
For Roblox, management estimates it had bookings of $247 million to $255 million, up modestly from February levels and up 23% to 27% year over year. That's a solid number and clearly shows that Roblox remains a very relevant gaming platform.
However, keep in mind that bookings aren't necessarily indicative of the future growth rate for the company. Bookings can fluctuate month to month, whereas revenue recognition tends to be steadier as gamers use up the Robux they have.
Therefore, if I were a shareholder, I would be happy with user engagement in March. But I would be more cautious with my optimism regarding bookings growth, since we can't take that metric in isolation.
