Key points:
- The metaverse leader is looking fragile, estimated average bookings down 25% year over year
- It's not all about DAU, Roblox needs to assure investors its business model is profitable
- Benchmark analyst points to further downside risk, citing disappointing February bookings
Whether you’re an avid believer of the Metaverse or not, the likelihood is you will have heard of Roblox (NYSE: RBLX) somewhere along your investment journey. The company has come a long way from meme-touting retail opinion; where it currently stands as a debated leader in the metaverse. A tenuous link with Facebook occurred with the relabeling into ‘Meta Platforms’ as sentiment seeps across the wider ‘meta’ sector.
Roblox surged in late 2021 as a result of Covid-induced gaming trends, but has continued to sell-off ever since; impeded by disappointing quarterly growth metrics and an alarming trend that investors should be wary of.
Firstly; don’t just look at daily active users (DAU). This might be the first thing investors look at to signify changing levels of growth, and whilst it may allude to increasing users on the platform, it doesn’t outline any patterns of monetization. The critical metric to understand Roblox’s revenue is average bookings – and this is what investors should be worried about.
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Looking at the company’s February data, daily active users stood at 55.1M, up 28% year over year. However, estimated bookings for February were between $203M and $206M, down 2%-4% year over year; estimated average bookings per daily active user was down 25% year over year. Benchmark analyst Mike Hickey announced his disappointment in the company’s February bookings, pointing out clear downside risk to the Q1 consensus view.
Although it could be argued that the company is merely emerging out of higher-than-normal user trends brought around by the pandemic, investors need to watch out carefully for average booking data to find the red flags hidden under the guise of user growth. Despite this, Roblox is still in its high-growth stage in an entirely new market, and hence average bookings should start to show some lineation with user growth as the brand continues to increase at a rapid rate.
