Why did Roblox stock plunge today? Bookings slowdown in focus

Jun. 16, 2022 2:33 PM ETRoblox Corporation (RBLX)By: Jason Aycock, SA News Editor9 Comments

Roblox Developer Conference 2019

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Roblox stock (NYSE:RBLX) has slid 15.8% to its lowest point in a month, as Morgan Stanley responds to May metrics by cutting its estimates for bookings (and its price target).

The company posted its monthly key figures on Wednesday, posting 17% year-over-year growth in daily active users, but estimating that bookings were down 9-11%. Per-user figures fared worse: Average bookings per daily active user were set to fall 23-24%.

The company attributed those bookings declines to a significantly stronger dollar in 2022 against foreign currencies including the euro and British pound - with the effect "more pronounced" in May 2022.

The upshot is a "mixed May in the metaverse," Morgan Stanley's Brian Nowak said. The 10% bookings growth deceleration was the slowest year-to-date, confounding investor expectations of a rebound from March's low of -9%. The dollar's strength likely contributed to a 4% reduction in the bookings growth, the company said.

While daily active users rose 17%, that was down by 2.7 million users from the previous month - the biggest such decline to date, Nowak noted.

Moving into the second half, the magnitude of any reacceleration in bookings growth will be the first key debate, he said - and he's staying cautious on the trends. He's cut 2022 and 2023 bookings forecasts by 2% each, though left sequential expectations for 2022 unchanged.

That's led to a lower price target of $25, vs. a current price of $24.37. Nowak is Equal Weight on Roblox (RBLX).

A bear case, though, suggests a target of $15 (or 39% downside), if bookings slow more than expected, user growth disappoints, or margins underperform expectations, Nowak wrote.

Wall Street analysts rate it a Buy on average - but Seeking Alpha authors have an average rating of Hold, and Seeking Alpha's own Quant Ratings approach signals a Sell on Roblox (RBLX).

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