Investors did not take kindly to the latest update from Roblox (RBLX). Shares of the video game platform shed 9% of their value in Wednesday’s session after the company released disappointing November metrics.
The headline metrics were also lower than J.P. Morgan’s Alexia Quadrani’s estimates.
Bookings came in between $208 million and $211 million, below Quadrani’s $229 million forecast. DAUs (daily active users) increased by 5% month-over-month vs. JPM’s 10% estimate, while ABPDAU (average bookings per daily active user) fell short too, also coming in at 5% MoM compared to JPM’s expectation of 9%.
That said, when factoring in management’s estimated $25 million of spend lost due to the Halloween weekend outage, Quadrani notes the bookings range is “largely comparable to October ($214 million-$217 million) and given that October/November are “historically similar” – in 2020, November showed a 3% sequential increase – the performance might not seem such an issue.
According to 3P data, it looks like the outage played its part on spend for roughly ten days “prior to normalization.” Although on the Q3 earnings call, management said that following the shutdown, users and engagement bounced back swiftly, Quadrani believes that, at least initially, there was some “lingering effect” in November.
Quadrani also thinks the surge in users seen in late September/early October, could partly be down to the popularity of Squid Game experiences on the platform.
On the plus side, the analyst highlights one promising metric, noting that hours per DAU per day increased sequentially by 4%, compared to a 1% uptick last November.
Looking forward, Quadrani notes that consensus bookings for Q4 currently stand at $771 million. To reach this level, December bookings would need to rise by 77% month-over-month. In December 2020, there was an 80% uptick.
“In that context,” Quadrani summed up, “The sell-off appears overdone, especially if November did see a negative impact from the outage.”
Quadrani rates RBLX an Overweight (i.e. Buy) along with a $123 price target. At current levels, this target suggests ~30% upside for the year ahead. (To watch Quadrani’s track record, click here)
All in all, most analysts remain on Roblox’ side. Based on 7 Buys, vs. 2 Holds, the stock boasts a Strong Buy consensus rating. The forecast calls for one-year gains of 23%, given the average price target comes in at $120.38. (See Roblox stock analysis on TipRanks)