Roblox Q2 preview: Where next for RBLX stock?

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Josh Warner
By :  ,  Market Analyst

When will Roblox release Q2 earnings?

Roblox will report second quarter earnings after US markets close on Tuesday August 9. The company will hold a conference call on Wednesday August 10 at 0530 PT, or 0830 ET.

 

Roblox Q2 earnings consensus

Bookings, which is what Roblox calls revenue, are forecast to fall 1.2% from last year to $657.2 million and adjusted Ebitda is expected to plunge over 57% to $71.4 million. 

 

Roblox Q2 earnings preview

Roblox has found 2022 difficult as the boom experienced during the pandemic continues to cool off.

Wall Street believes Roblox ended June with just under 54 million Daily Active Users (DAUs), down 105,000 from the end of March but still almost 25% higher than the year before. The sequential drop in users will be caused by losses in North America and Europe and only partly countered by ongoing growth in APAC and the rest of the world.

Eyes will remain on the age range of users as Roblox continues to widen its appeal. The company was particularly popular with children under the age of 13 when it started out but has gradually enticed older users to its platform and these now account for the majority of users.

Although it is struggling to grow its user base, Roblox is improving engagement with existing users. The hours spent on its platform is forecast to keep growing across all regions compared to the last quarter, although the average bookings per user has been under pressure this year as people spend less money on in-home entertainment compared to when they were locked up during the pandemic last year. Roblox makes its money by selling its Robux virtual currency, which users purchase and use to buy access to games and style the avatars they use to traverse its platform.

Roblox has continued to introduce new features in an effort to improve engagement and entice users to spend more money. The most significant is spatial voice, which allows users to speak and listed to nearby users with a microphone. The introduction of voice chat capabilities is particularly significant for a platform that is popular with children, which has prompted Roblox to step-up its age verification process. Meanwhile, it has also introduced new features like layered clothing that provides more options for those wanting to personalise their avatars and tinkered with its cross-device capabilities in the hope of driving better retention rates.

The expansion into new markets continues and this is a deliberate area of focus considering this is delivering user growth at a time when more mature markets are struggling. Its new Roblox Translate service is making more user-developed content available into new countries, and it has also been ensuring its service is more reliable in markets like India, where a new data centre has resulted in latencies dropping by 50%.

More is on the way as Roblox continues to champion the metaverse. It is exploring some more advanced features such as physical-based rendering to improve visuals and what it calls Dynamic Heads, which track users’ expressions in real life using a camera and makes their digital avatars copy them.

We could also see more commentary on its growing ad business, which may have benefited as more marketing dollars shift away from social media. As a hub for creators, Roblox is in a perfect position for those looking to get their brand out there. This ranges from sponsored search results to boost a particular developer’s experience that they have developed on the platform to newer concepts such as in-game advertising in its metaverse.

 

Where next for RBLX stock?

Roblox shares have been rising in an uptrend during the past three weeks and have more than doubled in value since hitting all-time lows of $21.90 back in May.

The stock needs to recapture $52 to surpass the highs seen in late March and early April, and the fact the average volume at time has started increasing during the past five days suggests the recent momentum can continue. A break above here will reopen the door to the $60 mark.

However, it could prove a tough ceiling considering the recent rise has already pushed the RSI into overbought territory. Any renewed pressure could see the stock swiftly fall back toward the $36 level of support seen on numerous occasions this year, which is also in-line with the 50-day moving average. Notably, the 21 brokers that cover Roblox have an average target price of $38.50, implying it is overvalued by over 22% at present. A break below here opens the door to sub-$30 for the first time in almost two months.

Roblox stock has more than doubled in value since hitting all-time lows

 

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