Game Over For RBLX? Lower Guidance, Falling Users Pull Stocks Lower

• Scrutiny over child safety pushed Roblox to adopt stringent safety measures. 
• Roblox updated its full-year guidance to “account for a continuation of the safety headwinds.” 
• Roblox reported a Q1 loss of $0.35 per share, which beat the analyst estimate for losses of $0.41 cents.

Roblox (RBLX) stock plunged 21% in after-hours trading on Thursday after the company slashed its full-year bookings guidance, citing headwinds from new age-verification requirements aimed at improving child safety. 

The video game maker’s Q1 revenue came in at $1.44 billion, which missed street expectations of $1.75 billion, while reporting a lower-than-expected loss of $0.35 per share against loss expectations of $0.41. 

Roblox, earlier this year, began requiring users globally to complete an age check in order to use text or voice chat on the platform. Through the end of Q1, 51% of global daily active users (DAUs) have age-checked, according to Roblox. 

The firm has faced intense scrutiny over the years related to children’s safety and has faced several lawsuits from the state, following which Roblox implemented the security measures, which, according to the company, have impacted growth.  

“We believe growth was also tempered by greater-than-expected headwinds from our age-check rollout, which restricted on-platform communication for non-age-checked users, diluted communication for age-checked users, and slowed new user acquisition,” Roblox wrote in a letter to shareholders. 

The video-game company reported a 35% year-on-year increase to 132 million daily active users, which fell short of analysts’ estimates of 143.8 million. However, it marked the second consecutive quarterly decline. Bookings came in at $1.7 billion, compared with Wall Street’s expectations of $1.73 billion. 

Hours engaged on the platform dropped to 31 billion hours in Q1 from 35 billion hours in the previous quarter, but had a 43% YoY growth. 

RBLX Retail View 

Retail sentiment on Stocktwits was ‘extremely bullish’ with ‘high’ message volumes. 

One user highlighted buying the stock at $40 was a good idea. 

The stock has lost 32% year-to-date. 

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