Wall Street Sees Positive Signs Ahead for Roblox

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Wall Street Sees Positive Signs Ahead for Roblox Wall Street can’t make up its mind about - esenlerbocekilaclama

Videogame company Roblox posted earnings that were worse than what analysts expected.


Courtesy of Roblox

Wall Street can’t make up its mind about


Roblox

earnings. Shares of the online videogame platform initially sank in after-hours trading Tuesday, only to surge as soon as the market opened on Wednesday.

After opening down at $21.92,


Roblox

(ticker: RBLX) shares rallied as high as $28.37 shortly after the market opened before paring gains. Shares of the firm, which provides a platform that lets users make games and interact online, closed up 3.4% to $23.97. The S&P 500 fell 1.7%.

One possible reason for the disconnect is the firm’s quarterly earnings call was Wednesday morning instead of shortly after the release on Tuesday.

During the call, executives provided upbeat commentary about efforts to improve monetization on the platform by better personalizing search functions and offering more advertising. The firm is popular with children and preteens, though its user base is getting older. The company suggested ways it can tailor discovery based on a user’s age and help them find experiences they may be more willing to spend money on.

Chief Financial Officer Michael Guthrie also said the year-over-year growth rate of bookings—a form of adjusted revenue—may have seen a bottom in March. The company faced tough comparisons as it lapped pandemic-driven user growth numbers.

“April was a little bit better than March,” Guthrie said, according to a transcript provided by Sentieo. “We suspect that May will be a little bit better. And that will continue as we go through the summer, and that ought to shrink that gap between user growth numbers and the rate of bookings growth. And that’s our expectation, especially as we go through the summer.”

Analysts were also weighing in on the stock. Stifel analyst Drew E. Crum, who has a Buy rating and $53 target price, wrote Wednesday that the first quarter results were slightly worse than he expected, while April bookings were slightly better.

“With this update, the company seemed to convey a more urgent approach to improving monetization,” he wrote, referring to updates from the firm on search, advertising, and user-generated content.

Another possible reason for the stock’s volatility is its high short interest. Recently 31.7 million shares were sold short, or 10.8% of shares available for trading, according to Bloomberg data. When short sellers rush to cover their position, that can create short-term buying pressure. Roblox shares have surged after earnings reports before.

Whatever the reason for the turnaround, Roblox shares could use the momentum: the stock is still down 68% in the past 12 months.

Write to Connor Smith at [email protected]

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