After years of stagnation, investors again have good reason to pay attention to Roblox (RBLX 0.28%) stock. Over the last year, the stock has surged by almost 200%.
Still, the gains seem to have stalled since mid-July as Roblox has traded in a range since that time. Hence, the question for investors is whether the entertainment stock's gains have temporarily paused, or could the stock stagnate or even fall under current conditions?
Where Roblox stands
Roblox has stood out with the uniqueness of its gaming platform. Instead of publishing games, it supports users who create and release their games to the public. The game designers can then earn revenue from their creations.
Moreover, Roblox has always maintained a massive following of gamers under 13 years old. Although the percentage of players in that age group has declined, they still account for 36% of its approximately 112 million daily active users (DAUs).
This also led to bookings growing at a rate of 51% per year. Nonetheless, in the earnings report for the second quarter of 2025, the forecast for Q3 bookings was 41%. Also, Corey Barrett of M Science estimated that the growth of those bookings had fallen to the low 30% range in September, which could sour investors on the stock.
What's more, the state of Louisiana filed suit against the company in mid-August, alleging that it fails to protect children on its platform from predators. This issue is particularly concerning since the platform delivers about 6.1 billion chat messages daily.
Roblox has countered the charge, stating that it has added over 40 new features to protect children and give parents greater control. Furthermore, its artificial intelligence-powered system, Roblox Sentinel, can detect interactions that may indicate child endangerment.
The continued financial struggles
Although such efforts to protect children are encouraging on the surface, those challenges could still cast doubt on Roblox stock amid its financials and valuation.
Roblox's $2.1 billion in revenue for the first half of the year grew by 25% compared to the same period in 2024. Unfortunately, that increase did not help reduce its operating loss, leading to a net loss attributable to shareholders for the first two quarters of 2025 of $493 million. The company lost $476 million in the same year-ago period.
For the full year, Roblox forecasts revenue between approximately $4.4 billion and $4.5 billion. This would amount to a 23% rise in revenue at the midpoint. Still, if M Science is right about the falling bookings growth, it could mean some pain for Roblox stock.
Moreover, despite the aforementioned stock gains, the stock is in correction territory, trading around 16% below its 52-week high. Although that drop is significant, it may not ease concerns about its valuation.
Due to its massive losses, Roblox does not have a P/E ratio. At a price-to-sales (P/S) ratio of 21, it is near its priciest level since the 2021 bull market ended. That is also a high enough sales multiple that investors may begin to question its valuation as revenue growth decelerates. Such conditions could bode poorly for the stock, at least in the near term.
Is now the right time to buy Roblox stock?
Considering the slowing revenue growth and high valuation, investors should probably refrain from adding shares of Roblox stock at this time.
Admittedly, Roblox's challenges with the lawsuit and slowing growth are likely not enough to challenge the company's long-term growth thesis. Measures to protect children should help address concerns about child safety. Also, investors should remember that slowing growth is still growth. Even if bookings drop to the low 30% levels, Roblox should still grow rapidly as a company.
Still, the near-term danger to the stock comes with the slowing growth. The 21 sales multiple probably makes the stock expensive, and when you also add concerns about the recent rise in the stock price, it increases the odds of a significant pullback as conditions deteriorate. Amid such conditions, investors should probably watch and wait before adding Roblox shares.
