Is it 'Game Over' for Roblox After Reporting March Metrics Miss?

Key Points

• Roblox shares collapsed (12%) after reporting its March 2023 user metrics.
• Daily active users (DAUs) rose 26% year-over-year (YoY) to 66.2 million but lost 1.1 million DAUs in just a month.
• March 2023, estimated revenues are between $212 million to $223 million, up 15% to 21% YoY.

3D video game and metaverse community platform Roblox Co. NYSE: RBLX shares plummeted 12% on April 17, upon the release of its March 2023 user metrics report. The report also caused Unity Software Inc. NYSE: U shares to sink. The company has struggled monetizing its daily active users (DAUs) due to its primarily free platform. Rising DAUs don't automatically equate to higher bookings or average bookings per daily active user (ABPDAU), affecting the Roblox stock forecast.

A dearth of stingy trick-or-treaters play the free version without spending money on Robux, the in-game currency used to make digital virtual purchases and access additional online privileges. The company continues efforts to expand its demographics to include older kids and adults as it provides access to video game consoles and partners with educational institutions and enterprises.  

Money Laundering

Court documents revealed that over 300 Roblox users used the platform to launder money. They used stolen credit cards to buy Robux in-game currency and spend them buying fake digital goods. They would continue these transactions back and forth between the same buyers and sellers using Robux. Roblox will pay a settlement of the two-year-old case for $7.5 million to the millions of users that may have been affected upon settlement.

Silicon Valley Bank Update

Roblox had reported on March 10 that 5% of its $3 billion in cash and securities, or $150 million, were held at Silicon Valley Bank. On March 13, the company moved all its cash and securities to another financial institution without impacting day-to-day operations. Find Roblox analyst targets and ratings on MarketBeat.

Roblox Bookings vs. Revenues

Most companies will report on bookings and revenues in the video game industry, especially common when subscriptions, in-game purchases, sales of virtual goods and microtransactions are frequent. However, they aren’t the same thing. Bookings are a non-GAAP financial metric referring to the total value of products and services sold but may not be delivered yet during the period. These include sales of digital goods, subscriptions and in-game advertising.

Net bookings are derived by adding total net revenues to the change in deferred net revenues for online games. Revenues are recognized after customers are invoiced and payment is received. In Roblox's case, bookings refer to the sale of Robux, its virtual currency used for all purchases and microtransactions.

March Monthly Metrics

Half of the kids in the country use Roblox, and the average age is 16. For March 2023, its DAUs grew 26% YoY to 66.2 million; however, it dropped by 1.1 million in just a month from its February metrics, indicating 67.3 million DAUs. January 2023 DAUs were 65 million, making February DAUs the peak in 2023. Its March ABPDAU improved from $3.73 to $3.85 in March versus $3.61 to $3.67 in February.

The ABPDAU fell from $4.11 to $4.17 in January 2023, when it had 65 million DAUs. Investors may have sold off the stock on concerns of the company no longer providing monthly user metrics. However, keep in mind that if DAUs fell by 1.1 million of which a good majority are non-paying trick-or-treaters, it will naturally bump up the ABPDAU, assuming more paid users stayed onboard versus trick-or-treaters.  

Daily Rising Price Channel Breakdown

The daily candlestick chart on RBLX has been in a rising price channel since making its low of $25.32 on December 23. Shares triggered the daily MSL on the $30.68 breakout, which shot up to $46.05 on February 16.

The rising trend line indicated that each pullback continued to make a higher low. Higher highs slowly formed, rising to the $47.67 level on April 12, holding above the daily market structure high (MSH) sell trigger on a $44.33 breakdown.

The March metrics release on April 17 gapped down shares below the daily MSH trigger as it hit a low of $39.10, bumping up against the daily 50-period moving average (MA) resistance at $41.61. Pullback support levels are $38.14, $34.69, $30.58 daily MSL trigger and $29.46.