Shares in Roblox are in a downward spiral after the firm announced a monthly decline in users, but is this a unique buying opportunity?
Having fallen more than 11% this week alone, investors in video game developer Roblox (NASDAQ: RBLX) might be itching to hit the panic button.
However, it is probably a tad premature to press quit on this gamer just yet…
What’s up with Roblox stock?
On Tuesday night, Roblox unveiled that its daily active users (DAUs) for May had fallen 1% month-over-month, to a meager 43 million. The pandemonium that followed was only exacerbated by the company further disappointing investors with news that its average bookings per DAU — the amount of virtual currency purchased per user — is expected to decline 2% to 3% year-over-year (YoY), to between $5.02 and $5.09.
Now, a decline is still a decline, but I am choosing to look at the glass as half full. So let’s look at Roblox’s numbers from another perspective:
- Its 43 million users is actually up 28% YoY.
- Total hours spent gaming are up 9% YoY to 3.2 billion.
- Total bookings are expected to rise 26% YoY in Q2.
- Total revenue is expected to rise 126% in Q2.
With users forced indoors, growth was accelerated in 2020. Now, with parents ushering their kids into the sunshine once more, of course growth will decline. But this does not take away from the massive gains Roblox has made in the past year.
For Roblox bulls, this dip could be seen as a great buying opportunity. As you’ll see from the graph below, the video game industry is growing faster than any other media sector, and Roblox is at the forefront of the new trend of ‘social’ gaming.
Perhaps this short-term dip will just be a blip on an otherwise long-term success story?
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