Shares of online gaming platform Roblox Corporation (RBLX 0.80%) tumbled 21% through 10:35 a.m. ET Thursday despite beating on both sales and earnings this morning.
Heading into the Q1 2024 report, analysts had forecast Roblox would lose $0.53 per share on $923 million in quarterly bookings. (A proxy for revenue, Roblox's bookings consist of sales of Robux, virtual currency that will eventually be spent and converted into revenue.) In fact, Roblox lost only $0.43 per share, and its bookings barely edged out expectations at $923.8 million.
NYSE: RBLX
Key Data Points
How bad were Roblox Q1 earnings?
So Roblox's report wasn't entirely devoid of good news. Revenue for the quarter grew 22% to $801.3 million. Bookings were up 19% year over year. The daily active user count grew 17%, and total time spent on the website was up 15%.
Net losses, while substantial, were less than feared and even down a bit from the $0.44 per share Roblox lost a year ago. "We are operating more efficiently," explained CFO Michael Guthrie.
Is Roblox stock a sell?
But if that's all true, then why is Roblox down today, and down so much? Well, guidance appears to provide part of the answer.
The fact that bookings grew more slowly than revenue already implies a future slowdown in revenue growth for Roblox, which is not a great look for a supposed growth stock. Roblox said that revenue in Q2 will range from $855 million to $880 million, so up from Q1. Of greater concern is the fact that management says bookings will range only from $870 million to $900 million. That's less than Roblox reported in Q1 and much less than the over $934 million in bookings that Wall Street wanted Roblox to promise.
Ultimately, Roblox simply needs to grow faster if it's to justify its current valuation of nearly 79 times trailing free cash flow. Midteens or even low-20th-percentile growth simply isn't going to cut it. And until Roblox shows it can grow faster, its stock will fall further.
