Roblox: Still On The Chopping Block

 

  • Roblox got hit by new allegations surrounding child porn on the platform.
  • The company already faces declining user growth issues with a normalization of the user base following pandemic pull-forwards.
  • The stock just isn't cheap enough at 9x forward sales with revenue growth targeted at only 20% and these allegations possibly further hitting user numbers.
  • This idea was discussed in more depth with members of my private investing community, Out Fox The Street. Learn More »
As company after company falls due to normalization of user growth following pandemic pull-forwards in prior years, Roblox (RBLX) remains on the chopping block. The stock is already down 55% from the highs and the new short report from The Bear Cave could easily push Roblox down to new lows. My investment thesis is no longer ultra-Bearish on the metaverse gaming stock at $60, but Roblox is likely to trade lower before hitting bottom.

Read the full article on Seeking Alpha. 

Disclosure: No position mentioned. Please review the disclaimer position for more details. 

Update 2 - Feb. 15

Ugly booking numbers despite decent DAU growth. Appears parents were giving kids cash for Robux during covid, but not now.

-Q4 GAAP EPS of -$0.25 misses by $0.13.
-Revenue of $568.8M (+83.5% Y/Y) misses by $212.9M.

-January 2022 Key Metric Estimates: Revenue was between $203 million - $206 million, up 64% - 66% year over year; DAUs were 54.7 million, up 32% from January 2021; Hours engaged were 4.2 billion, up 26% year over year; Bookings were between $220 million and $223 million, up 2% - 3% year over year; ABPDAU were between $4.02 - $4.08, down 22% - 23% year over year

Update - Feb. 15

Here we go, the media is on their case now.... could be a wild earnings call with Roblox reporting after the close. Definitely not interested in the stock until the company takes a user hit and reforms their policies to better protect kids. 

-According to an investigation done by the BBC, Roblox (RBLX) users create "condos," where people can talk about sex and their avatars can engage in various sexual acts, with the company's rules tossed aside.

-In a statement to the BBC, Roblox (RBLX) acknowledged that "an extremely small subset of users ... deliberately try to break the rules," adding that it is continuously taking the games offline using both automated and manual systems.

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