Roblox: Don't Chase

 

  • Roblox reported more weak Q1'22 numbers and provided weak estimates for April.
  • The company continues to grow overall users and hours engaged, but the business faces tough comps in the key U.S. market.
  • The stock bounced on weak numbers in a bullish sign, but Roblox has bounced too far to chase here.
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After warning people a few months ago that the struggles at Roblox (NYSE:RBLX) would persist, the stock likely reached a capitulation point last week. The online gaming and metaverse company continues to face tough comps from the huge covid pull forwards last year. My investment thesis is more bullish on the stock, though the large snap back rally last week should be faded.

Read the full article on Seeking Alpha. 

Disclosure: No position. Please read the disclaimer page for more details. 

Update - June 10 
These are the types of analyst calls that create a bottom. Roblox appears set for a retest of the May bottom. 

-Goldman Sachs cut its rating on Roblox (NYSE:RBLX) to Sell from Neutral Friday on a host of near-term concerns.

-Analyst Eric Sheridan also lowered his price target to $28 from $39 per share. That's a little more than 8% below current levels.
Finviz Chart
Update - June 3

Morgan Stanley analyst Katy Huberty highlighting very weak App Store revenues Apple (AAPL) is a bad signal for engagement on Roblox. She suggests Sensor Tower has revenue only growing 4% in May. 

The Atlantic Equities cut to Neutral from a few days ago appears wise. Roblox will report another weak quarter in Q2. How the stock performs from here is key. So far Roblox hasn't hit new lows in a positive sign. 

Finviz Chart

Update - May 24

Analysts throwing in the towel creates stock bottoms...

-Roblox has slipped 9.7% alongside a rough open for the broader market as Atlantic Equities cuts to Neutral, pointing to softening trends in engagement.

-The company's taking the right approach to boost its focus on monetization, analyst Kunaal Malde says, and booking trends should improve amid easier comparisons from here.

-Atlantic has cut its price target to $30 from $60

Finviz Chart

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