Online game creation and community ecosystem platform Roblox NYSE: RBLX
stock has seen better days trading as high as $141.60 on the Metaverse hype before toppling to a low of $23.88 in June 2022. The concept of Roblox can be confusing to investors. Roblox is not a game, like Minecraft. It’s an online game development platform and social
ecosystem that users can create games on. These games can be shared, played and sold to other users. The platform is most popular with children under 16, of which more than half of all kids in the U.S. are active users. The platform is free to use, helping it to garner over 160 million monthly active users and 52 million average daily active users (DAUs). The pandemic
lockdowns was a blessing for the Company as bored kids all over the world discovered and played Roblox obsessively. The reopening has finally caught up to the Company as net bookings start to fall back during its normalization stage.
Users Playing More But Spending Less
Consumer discretionary spending is taking a sharp hit stemming from inflationary pressures. Video gaming is suffering as result of tightening consumer wallets. Net bookings are dropping for video game publishers across the board like Electronic Arts NYSE: EA and Take-Two Interactive NASDAQ: TTWO. Graphics chip maker NVIDIA also cut their earnings guidance blaming the slowdown in gaming. Roblox is still seeing rising engagements, but its net bookings are falling. In other words, Roblox users are playing more but spending less.
Users can purchase in-game currency known as Robux through microtransactions to take actions (IE: changing username), upload games or buy digital items, accessories, characters, skills, tools and play games. Robux is the blood of the Roblox economy. Roblox cards can be purchased worldwide in retail stores to be used for microtransactions. They are called microtransactions because of the small dollar amounts of the transactions ranging from sub-penny to hundreds of dollars that players can spend. The in-game currency fluctuates like a real currency as more supply grows. Robux and gets cheaper in higher denominations. These microtransactions can quickly add up, as shocked parents receive hefty bills on their credit card statements. It’s especially controversial since these transactions are made by minors. The Company has also rolled out its premium members subscription plans ranging from $4.99 for 450 Robux to $9.99 for 1,000 Robux per month and $19.99 for 2,200 Robux per month. The plans also enable benefits like further discounts on Robux purchases, access to exclusive items, and access to the trade system. Users and groups can also earn Robux through premium payouts when other Robux premium subscribers are playing their games. The Company has also partnered with many corporate sponsors like Microsoft Rewards (NASDAQ: MSFT) to redeem points to Robux. Roblox also earns promotion, licensing and advertising revenues from brands that target the younger demographic.
While over 70% of Roblox users access it through a mobile device, the Company is expanding its access by adding gaming consoles like the Sony PlayStation 5 NYSE: SNE and Microsoft Xbox (NASDAQ: MSFT). It’s also working to reach an older demographic while maintaining its core audience. The Company is trying to move past its game or game platform stigma to a refined “human experience platform”.
Strong Engagement but Weakening Bookings
On Aug. 9, 2022, Roblox released its fiscal second-quarter 2021 results for the quarter ending June 2022. The Company reported an earnings-per-share (EPS) loss of (-$0.30) missing analyst estimates for (-$0.26), by (-$0.04). Bookings fell (-3.8%) year-over-year (YoY) to $639.9 million beating $625.43 consensus analyst estimates. Average bookings per DAU was between $12.25, down (-21%) YoY. Revenues grew 30% YoY to $591.2 million. Net loss was $176 million missing analyst expectations for (-$157 million). DAUs rose 21% YoY to 52.2 million. Hours engaged rose 16% YoY to 11.3 billion. Roblox CEO David Baszucki commented, “We are driving record levels of users and engagement globally as we execute on our innovation roadmap and broaden the appeal of Roblox across geographies and age groups. We continue to make progress on key operational and product initiatives to enhance the long-term value of the Roblox platform.”
July Metrics Still Show Bookings Falling
For July 2022, Roblox saw revenues by rise 25% to 27% YoY between $205 million to $208 million. Bookings rose 8% to 10% YoY between $243 million and $247 million. DAUs were up 26% to 58.5 million. Hours engaged rose 25% YoY to 4.7 billion. Average bookings per DAU was between $4.15 to $4.22, down (-12%) to (-14%) YoY. The downward trend in bookings are continuing to expand so far. The question is whether Roblox can reverse that negative trend by expanding its demographics and compelling users to spend more.
What the Chart Says
Using the rifle charts on the weekly and daily time frames provides a precision view of the playing field for RBLX shares. The weekly rifle chart completed a full stochastic oscillation up through the 80-band and is proceeding to fall back under the 80-band. The weekly uptrend is stalling as the weekly 5-period moving average (MA) is sloping down at $44.11 to a stalling 15-period MA near the $37.92 Fibonacci (fib) level. The weekly market structure low (MSL) buy trigger is trying to defend itself at $36.43. The daily rifle chart downtrend has a falling 5-period MA at $38.76 followed by the 15-period MA at $41.95 and 200-period MA at $56.02. The daily lower Bollinger Bands sit at $32.52 and upper BBs at $54.89. The daily stochastic is attempting to bounce off the 5-band. Attractive pullback levels sit at the $36.43 weekly MSL trigger, $34.45 fib, $30.89 fib, $29.56 fib, $26.08 fib, and the $24.01 fib level.
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