Why Roblox Stock Malfunctioned Today

Roblox Corporation (NYSE: RBLX) stock crashed 15.1% through 11:15 a.m. ET Friday after reporting mixed earnings in its Q1 report last night.

Heading into the quarter, analysts forecast the popular online video game platform would report a $0.41-per-share loss, and the good news is that Roblox lost only $0.35 per share — an earnings “beat.” Bookings forecast to exceed $1.7 billion fell short of that mark, however — a “miss.”

Will AI create the world’s first trillionaire? Our team just released a report on the one little-known company, called an “Indispensable Monopoly” providing the critical technology Nvidia and Intel both need. Continue »

Roblox Q1 earnings

Roblox has never earned a profit. According to analysts polled by S&P Global Market Intelligence, Roblox is not expected ever to report a profit, as far out as analysts publish estimates (2030). This forces analysts and investors to focus on numbers other than just the usual “earnings calculated under generally accepted accounting principles” (GAAP) when evaluating Roblox stock.

What numbers, precisely?

• Sales growth: up 39% to $1.4 billion in Q1 at Roblox.

• Bookings (or put another way, anticipated future sales) growth: up 43% to $1.7 billion.

• And daily average users growth, up 35%, and hours of gamer engagement — up 43%.

And of course, the most important number of all: Free cash flow, which for Roblox was $596 million in Q1, up 40% year over year.

What’s next for Roblox stock?

Those numbers all look quite good for Roblox, but it was one number in particular that upset investors today, and that was bookings. Turning to guidance, Roblox told investors it expects bookings to grow only to $1.6 billion or so in Q2, and perhaps $7.5 billion through the end of the year. Problem is, Wall Street analysts wanted to see Roblox promise $1.9 billion in Q2 bookings, and $8.4 billion for the year.

Roblox failed to do that.

This is why Roblox stock is down today.

Should you buy stock in Roblox right now?

Before you buy stock in Roblox, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Roblox wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you’d have $504,832!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $1,223,471!*