What happened
Shares of mobile-gaming platform Roblox (RBLX 2.87%) went down 20.9% in April, according to data provided by S&P Global Market Intelligence. The company habitually updates shareholders with monthly metrics. It did so again in April, causing a strong negative reaction from the market.
So what
For the first half of April, Roblox stock traded roughly in-line with the S&P 500. However, on April 17, the company reported preliminary financial metrics for March, and the market didn't like what it saw.
Roblox had 66.2 million daily active users (DAUs) in March. That was down from the 67.3 million DAUs it reported for February, and this is what the market didn't like. However, to be fair, DAUs in March were still up from 65 million in January and 56 million on average in 2022.
While DAUs took a small step back in March, these numbers were still quite strong for Roblox. Moreover, user engagement was impressive during March. The platform's users spent 4.8 billion hours on Roblox during March, compared to just 4.6 billion hours in February.
Therefore, these numbers were quite good for Roblox despite the negative reaction from the market. However, the analyst community didn't do much to instill confidence. While several analysts gave price targets for Roblox stock higher than where it trades now, the commentary sounded indifferent, in my opinion.
For example, Stifel analyst Drew Crum weighed in immediately following the release of March numbers. According to The Fly, Crum said the company's numbers were better than expected but still weren't enough to get the market excited, which wasn't what you'd expect to hear if the analyst were more bullish.
Now what
Roblox is scheduled to report financial results for the first quarter of 2023 on May 10. This is an interesting business that investors should familiarize themselves with beforehand.
Roblox offers a free platform that allows third parties to create video games and digital experiences. These creators and developers can earn money by selling in-game items and are rewarded for driving user engagement. Users pay for virtual items with the on-platform currency Robux. These deposits are monitored with the bookings metric. Finally, Roblox generates revenue by taking a cut of each transaction.
In March, Roblox estimates its bookings were up between 23% and 27% year over year, which is a really encouraging sign. For perspective, the company's bookings were only up 5% in 2022 compared to 2021. Therefore, the March numbers tentatively signal that the company may be returning to a better growth rate.
Investors now just have to wait until May 10 to know for sure how the company is doing right now. But the latest numbers were encouraging, even though the stock price took a step back.
