Roblox Stock Crashes 25% After Lackluster Earnings

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Topline

Shares of online gaming platform Roblox plummeted 25% Wednesday morning after a worse-than-expected earnings report, making the explosively popular Gen-Z favorite one of the latest victims of skittish investors who have been punishing tech companies for failing to meet revenue expectations.

The Gen-Z gaming platform that skyrocketed in popularity during the pandemic lost $10 billion in … [+] market value Wednesday.

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Key Facts

Roblox shares were trading around $55, close to a record low of $53.63 set last month, after it reported a worse-than-expected loss after the close Tuesday of $143 million in the fourth quarter, nearly triple the $59 million loss one year earlier.

Sales were up 83% year over year to $568.8 million, but that fell short of the consensus analyst estimate of $604 million.

In a Wednesday morning note to clients, Morgan Stanley analyst Brian Nowak said the “disappointing” results speak to the difficulties many companies that saw massive growth during the pandemic will face as consumer behavior changes with the economy reopening.

Benchmark analyst Mike Hickey pointed out that although daily active users jumped 32% year over year to a record high 54.7 million, the number of users fell from the previous quarter in North America, its biggest market.

Roblox acknowledged the uncertainty in its shareholder letter, saying growth will be “toughest” in the United States and the United Kingdom, where easing Covid restrictions have allowed more people to return to work and school.

The Wednesday stock plunge wiped out more than $10 billion in market value, and its shares have now cratered more than 60% from an all-time high in November, the same month the tech-heavy Nasdaq hit its latest record.

Big Number

$3.7 billion. That’s how much Roblox CEO David Baszucki, who cofounded the social gaming platform in 2004, is worth, according to Forbes. His fortune fell more than $1 billion as shares plunged Wednesday.

Key Background

San Mateo, Calif.-based Roblox went public along with Airbnb and DoorDash at the height of the pandemic, with its shares skyrocketing more than 50% after commencing trading in March. The platform, which allows users to design and build out their own online games, claims about two-thirds of children in the U.S. between the ages of 9 to 12 play its games.

Tangent

Roblox isn’t the only tech stock plunging Wednesday morning after a worse-than-expected earnings report. Canadian online shopping platform Shopify, whose shares quadrupled during the pandemic, tumbled more than 18% after the firm warned sales growth will likely slow in the second half of this year. Like Roblox, the stock is now down about 60% from its record high in November.