RBLX Stock Forecast: Roblox falls by nearly 13% as Fed raise rates

RBLX Stock Forecast: Roblox falls by nearly 13% as Fed raise rates
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May 6th, RBLX Stock Forecast: The overall recommendation is Sell

In the next few hours, the RBLX is expected to trade between $24.5 and $33.1.

3 out of the 4 momentum indicators are Negative.

RBLX Stock Forecast: RBLX Stock Chart

Share Volume
21.6 M
Forward P/E (1 Year)
-38.33

RBLX Stock: Momentum Summary

Price
Lower
Share Volume
Higher
Technical Indicator
Sell
Social Media Sentiment
Negative

RBLX Stock Forecast: Support and Resistance

Analyst
Support
Resistance
Recommendation
$29.4 (S3)
$30.6 (R1)
Sell
$24.5 (S3)
$33.1 (R1)
Sell

RBLX Stock forecast: CrowdWisdom360 Insights

• US FED increased rates by 50 points to curb inflation. Most of the stocks have been under performing
the market ever since then.
• Roblox has seen a fall of nearly 4% in the last 5 days. In the previous trading session, RBLX closed
12.73% lower at $30.44.
• Roblox Corporation is set to release its Q1 results on 10th May 2022 after the market close. According
to Zacks- the company will reports EPS of -$0.23. In the last quarterly earnings (Q4 2021), Roblox
reported EPS of -$0.25.
The short term recommendation is to sell this stock.

RBLX Stock forecast: Social Media Sentiment

Date
1 Day
7 Days
Sentiment
6th May
-12%
-29%
Negative

RBLX Stock Forecast: Why Roblox Stock Down

Roblox Corporation shares (NYSE: RBLX) are down by 11.51% yesterday (9.05.2022) and has lost -44.09 % in last one month. After peaking at $134.72 on 19th Nov 2021, RBLX shares have lost nearly 80% of its value.

Why Roblox Stock Down? There are numerous reasons for this spectacular downfall but the foremost being the bad market sentiments around the globe including United States. In last one-month tech heavy Nasdaq index is down 13% and various high growth stocks like Amazon and Meta Platforms have fallen more than 20%. Parallels can be drawn with Netflix Inc as it is also user based platform and is heavily dependent on subscription revenue. Netflix have fallen 50.26% in last one month alone and is 64.43% down in last one year. Investors are having a second look at the stocks which were flying higher due to Covid-19 induced lockdown.

There are reasons specific to Roblox Corporation also contributing to the downfall. There is less demand for its online currency and usage rates are also slowing. Roblox management warned for decelerated growth in revenue in the upcoming quarter results due to increased price sensitivity and poor economic growth. Well-known analyst BofA have downgraded the first quarter result estimates expected to release after market hours on 10th May 2022. First quarter bookings estimate is now revised to be -3% YoY as compared to +23% earlier stated. Also, there is report from Bear Cave alleging Roblox for the sexual violence against the children which has dented the image of the company.

While the deceleration is expected once the pandemic is over, but the uncertainty of the quantum of the drop in the usage is what is worrying the investors. When large cap companies like Netflix Inc is having a tough time at the market, Roblox is surely going to get its hit. But the announcement of first quarter results along with the future guidance on 10th May will be interesting to watch and that can change the tide for RBLX stock.

RBLX Stock Forecast: Latest Tweets

No latest technical analysis tweets.

RBLX Stock Forecast: Latest Video

RBLX Stock Forecast: Bull Case

  • Diverse Business Model- There are two divisions of Roblox Corporation business model. On one hand, Roblox creates a two-way relationship between gamers and developers. While developers get a platform to develop games and showcase their skills and gamers reward them by spending money on these virtual games. Then developers use this money to improve upon the quality of game, which helps to develop a strong fan base of gamers and users. It ensures that quality of services is upgraded timely and it gets rewarded by ever growing users. On other hand is the social element of Roblox platform. It provides the platform for an artist to launch song or video and a team can also use Roblox platform for official meeting. As a result, a user joining Roblox invites friends to do the same and it helps to create a chain.  
  • Metaverse Holds Potential –The world is moving towards metaverse with every passing year. The expected market size of metaverse was $470 billion in 2020 and this could grow to $780 billion in 2024 according to GDA Capital. Roblox Corporation has 47 million daily users on its platform. While currently revenue from advertising, licensing and royalty is miniscule, it could change in the era of metaverse for Roblox. Brands are spending money to create experience on such platforms. For example, Nike has created NIKELAND. Huge user base enables Roblox to compete with Roku Channel, an advertising based platform in US.  
  • Excellent Cash Flows – Although, Roblox spends huge sum of money on R&D, Infrastructure and servers, but still company can be profitable going forward. The main reason being huge free cash flows (FCF) with the company. Company generated $599 million in free cash flow on a revenue of $1.66 billion in last 12 months. It turns out to be $0.36 of FCF for every dollar revenue generated. This is commendable especially considering a company in the growth mode. It indicates that it has cash available after investing for the development of business. Currently, the net income is negative because Roblox is focusing on future growth and this could change upside down with increasing revenue and FCF with increased user base.
  • Recent Dip in Stock Valuations – Roblox came with initial public offering in March 2021, with an initial price of $69.70, and by fag end of November 2021, it touched a high of $141 and at that point of time, it was trading at a price to sales ratio of almost 21. But since then it has been a forgettable downward journey for the stock and the share price has corrected more than 60% to trade at $46.95 as of 2.3.2022, 10:32 am GMT. So, the valuations have greatly cooled off and analysts are projecting 21% growth in revenue for 2022, which comes out to be $3.3 billion, creating a not so expensive forward price to sales ratio of just below 10. 

Also Read: Ford Stock Forecast

RBLX Stock Forecast: Bear Case

  • Number of Users Slowing Down –Covid pandemic acted as a boon for RBLX stock. People switched to online gaming profoundly and as a result, user base grew at 40% to 50% for Roblox in 2019. It accelerated to 97% at its peak in 2020. But it has started to cool off since then in 2021, with user growth being 79% in first quarter, followed by 29% and 31% in the following two quarters year over year. User growth is most important for Roblox as its revenue model is deeply dependent on it, because developers take their reward from growing user base. If user base further falls in coming quarters, it will be troubling sign for investors.
  • Widening Losses in Balance Sheet –As the number of users are decreasing and monetizing rates decelerating, losses continue to widen in each reporting. Its net loss increased from $70 million in 2019 to about $250 million in 2020 and then surprisingly to $453 million in 2021. These losses are attributed to various factors like Roblox’s developer exchange fees (to convert Robux back to world currencies), infrastructure costs and safety related expenditures for minor. Also it spends huge sum of money in R&D to create new features and stock compensation expenses (nearly 18% of revenue as of 2021). It does not look like it can reduce any of these above mentioned expenses going forward. Also, total liabilities have gone to touch $4 billion in 2021, making the things worse for the company.  
  • Allegation against Children Safety – RBLX shares have fallen nearly 29% in last one month as of this writing. The major contributor in this fall is a short report from The Bear Cave. The report alleges the company for the sexual violence against children on the platform. The report claims of pedophile activity on the platform with supporting images. However, a spokesperson from Roblox thrashed the report, labeling it to completely false and misleading. These issues do dent the image of company in front of investors for at least short period of time if not forever. It will be interesting to see how Roblox deals with these issues in future quarter results conference calls.

RBLX Stock Forecast: Conclusion

RBLX is best to avoid for investment at this juncture of time. There are multiple reasons for the same. However, decreasing user base and monetization and safety issues are at the top. Roblox as a concept is in the right direction, but it has failed to generate net income in last 17 years and that is something not digestible. Moreover, with increasing interest rates and pandemic being over it seems that darling time of Roblox is also over.

If someone believes in the idea of online gaming and Roblox Corporation, he/she can consider investing, but it looks like current global scenario will provide a better entry point.

RBLX stock forecast

-Vineet Agarwal

Note: Crowdwisdom360 collates Predictions and data from all over the net and has no in-house view on the likely trends in the Stocks or Crypto Coins. Please consult a registered investment advisor to guide you on your financial decisions.

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