Roblox shares plummeted 30%. Analysts have begun advising investors to sell them

Shares of Roblox, the developer of the gaming platform, plummeted by more than 30% during trading on July 31 after the company released a forecast that fell significantly short of Wall Street’s expectations. Several analysts have already revised their recommendations on the company’s stock and are now advising investors to sell.

Roblox reported that user payments in the third quarter are expected to reach between $1.58 billion and $1.65 billion. This is significantly below analysts’ expectations—they had forecast payments of $1.9 billion, according to Barron’s. Roblox’s revenue forecast also fell short of analysts’ estimates—the company expects $1.41–1.49 billion, compared to Wall Street’s consensus of $1.86 billion. In addition, Roblox declined to provide a full-year forecast, stating that it does not consider annual guidance to be useful for investors given the company’s long-term strategy.

Following this, Roblox shares fell by more than 30%. July 31 could be the worst day for Roblox shares in the company’s history, according to Dow Jones Market Data cited by Barron’s. The stock had already been under pressure even before the earnings report—it had fallen nearly 60% since the beginning of the year.

The company’s stock price is falling, even though Roblox reported that its loss per share narrowed in the second quarter to $0.26 per share from $0.41 a year earlier. Analysts had expected a loss of $0.34 per share, Barron’s notes. User revenue rose 8% to $1.57 billion, but fell short of analysts’ consensus estimate of $1.6 billion and came in at the lower end of the company’s own forecast.

Roblox executives attributed the results to a decline in monetization among young users in the U.S. and Canada, as well as changes to the content recommendation algorithm that negatively impacted the platform’s metrics, according to Barron’s.

"We believe the platform may be entering a downturn: while the first quarter saw weakness in user acquisition, the second quarter saw that weakness extend to monetization and increasingly affect the under-13 audience, which drives the platform’s organic growth and accounts for a significant portion of parent-funded spending,”, Barron’s quotes Benchmark analyst Mike Hickey as saying. According to him, investor confidence in the company is declining, the brand is losing ground, and Roblox’s core business as a gaming platform continues to deteriorate.

Hikky downgraded the stock from “Hold” to “Sell.” Analysts at BTIG did the same, according to Barron’s.

This article was AI-translated and verified by a human editor