Roblox, king of the metaverse, has lost its mojo

The desperate cry came out of the heart of social networks.

“ROBLOX UR STOCK DIVES INTO THE MULTIVERSE OF DOCTOR STRANGE”, the commentator tweeted, referencing the recent Marvel movie. “THIS DOESN’T HELP.”

It may sound a bit harsh, but Roblox Corp. (RBLX) – Get Roblox Corp’s Class A Report.a video game developer, has been hit with bad mojo over the past few months.

“The Foreseeable Future”

Founded by David Baszucki and the late Erik Casse, Roblox ended nearly 11% lower at $30 on June 3, a far cry from its all-time closing price of $134.72, which it hit on November 19. The stock lost $71. % of its value since January, and about $40 billion in market capitalization has evaporated during that time.

The company launched Roblox, an online gaming platform and game creation system, which allows users to program games and play games created by other users.

There are more than 202 million monthly active Roblox users worldwide, the company said.

Roblox is free to play, with in-game purchases available through a virtual currency called Robux.

Lately, analysts haven’t been up to snuff on Roblox, which went public on March 10, 2021.

The company has missed Wall Street expectations for two straight quarters as Covid-19 pandemic restrictions eased and users started going out again.

Roblox said in a letter to shareholders that “we expect to continue to report net losses for the foreseeable future, even as we expect to generate net cash from operating activities.”

“Report user engagement”

Last month, Kunaal Malde, an analyst at Atlantic Equities, downgraded the company to neutral, saying user engagement numbers signaled trouble ahead as the company tries to monetize its online gaming platform. .

Malde also cut his price target to $30 per share from $60.

Morgan Stanley analyst Brian Nowak expressed concern about the company’s revenue growth in the second half.

Nowak, who lowered his price target from $32 to $27, predicted increased investment in developers could negatively affect the company’s margins, while questioning the dilutive impact of some compensation options. in shares offered by the company.

While the first quarter was “better than expected,” Novak said he remains cautious about revenue trends in the second half and into 2023.

The analyst reiterated his “equal weight” rating, but warned of a potential bearish case where the stock drops as low as $15 per share.

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“Lost contact with his community”

Roblox has also been beaten on social media.

“Dad, buy some ROBLOX stock” the kids said, “a tweet read. “It will be fun” they said… -51%”

“the problem lies in public relations and community interaction” a the person tweeted“now that they realize they don’t have to try to make money anymore, they can cut down on the pointless and focus on what’s more important like their stock, roblox had lost touch with the community.”

Another commenter paid the company a compliment by posting an image of actress Amber Heard that said her net worth was negative $8 million, after her ex-husband Johnny Depp received $10 million in a defamation case.

“it’s worse than roblox stock”, the person declared. “Holy shit”

“It’s not attractive”

Roblox has a big presence in the metaverse, which seems to be losing some of its shine recently.

Marc Petit, vice president of Epic Games and general manager of Unreal Engine, recently told Yahoo Finance that “people kind of lost interest in the metaverse because the characters look like cartoons with no legs.”

“I mean, who wants to be that?” he asked. “It’s not attractive.”

A survey by Axios and market research software company Momentive found that 60% of respondents were unaware of the idea of ​​a metaverse.

Of those familiar with the Metaverse, 50% are neither afraid nor excited about it, while 35% are more afraid and 14% are more excited.

And Roblox has been accused by the Youtube channel people make games to exploit young video game developers by taking an inordinate share of the revenue generated by games on their platform.

‘Continuous innovation’

Baszucki reiterated the company’s growth on the May 11 analyst call: daily active users totaled 54 million for the first quarter, up 28% year-over-year and the highest never recorded.

Engagement hours were up 22%, while bookings were $631 million for the first quarter, down 3% from the prior year’s total. Roblox also generated over $150 million in net cash and $100 million in free cash in the first quarter.

“March, we think, was our toughest month with Covid,” Baszucki said, according to a transcript of the call. “And what’s really exciting is that all the user gains that we’ve generally accrued during Covid, we’ve retained.”

Yet, he added, “our bookings are highly correlated to engagement hours, and our hours have been declining in some cohorts as we move out of Covid.”

“We continue to believe that part of the long-term growth of our business lies in continued innovation,” Baszucki said.

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