Can Roblox Cancel Falling Reservations Amid Rising Engagements
Users play more but spend less
Users play more but spend less
Discretionary consumer spending is being hit hard by inflationary pressures. Video games are suffering from the tightening of consumer wallets. Net bookings are down for video game publishers across the board like Electronic Arts (NYSE:EA) and Take-Two Interactive (NASDAQ:TTWO). Graphics chipmaker NVIDIA also cut its profit forecast, blaming slowing gaming. Roblox is still seeing an increase in engagements, but its net bookings are down. In other words, Roblox users play more but spend less.
Users can purchase in-game currency known as Robux through microtransactions to perform actions (i.e. change username), download games, or purchase digital items , accessories, characters, skills, tools and play games. Robux is the lifeblood of the Roblox economy. Roblox cards can be purchased worldwide from retail stores to be used for microtransactions. They are called microtransactions because of the small dollar amounts of transactions ranging from less than a penny to hundreds of dollars that players can spend. In-game currency fluctuates like real currency as supply increases. Robux and becomes cheaper in higher denominations. These microtransactions can quickly add up, as shocked parents receive hefty bills on their credit card statements. This is all the more controversial as these transactions are carried out by minors. The company has also rolled out its premium subscription plans ranging from $4.99 for 450 Robux to $9.99 for 1000 Robux per month and $19.99 for 2200 Robux per month. The plans also allow perks such as additional discounts on Robux purchases, access to exclusive items, and access to the trading system. Users and groups can also earn Robux through premium payouts when other premium Robux subscribers play their games. The company has also partnered with many corporate sponsors such as Microsoft Rewards (NASDAQ: MSFT) to redeem points for Robux. Roblox also generates revenue from promoting, licensing, and advertising brands that target young people.
While over 70% of Roblox users access it through a mobile device, the company is expanding its access by adding gaming consoles like the Sony PlayStation 5 (NYSE: SNE) and Microsoft Xbox (NASDAQ: MSFT). It also strives to reach an older demographic while maintaining its core audience. The company is trying to move beyond the stigma of its game or game platform to a polished “human experience platform”.
Strong engagement but weakening bookings
On August 9, 2022, Roblox released its fiscal second quarter 2021 results for the quarter ending June 2022. The company reported an earnings per share (EPS) loss of (-$0.30) missing analyst estimates for (-$0.26), from (-$0.04). Bookings fell (-3.8%) year-over-year (YoY) to $639.9 million, beating analysts’ consensus estimate of $625.43. Average bookings per DAU were between $12.25, down (-21%) year-over-year. Revenue increased 30% year-on-year to $591.2 million. Net loss was $176 million, missing analysts’ expectations (-$157 million). DAUs increased 21% year-on-year to 52.2 million. Committed hours increased 16% year-on-year to 11.3 billion. Roblox CEO David Baszucki commented, “We are achieving record levels of users and engagement globally as we execute on our innovation roadmap and expand the appeal of Roblox across geographical areas and age groups. We continue to make progress on key operational and product initiatives to improve the long-term value of the Roblox platform. »
July metrics still show declining bookings
For July 2022, Roblox saw revenue grow 25% to 27% year-over-year to $205-208 million. Bookings increased 8% to 10% year-over-year between $243 million and $247 million. DAUs increased by 26% to 58.5 million. Committed hours increased 25% year-on-year to 4.7 billion. Average bookings per DAU were between $4.15 and $4.22, down (-12%) to (-14%) YoY. The downward trend in bookings continues so far. The question is whether Roblox can reverse this negative trend by expanding its demographics and forcing users to spend more.
What the graph says
Using rifle charts on the weekly and daily time frames provides an accurate view of the playing field for RBLX stocks. The weekly Rifle chart has made a full stochastic oscillation to the 80 band and continues to fall back below the 80 band. The weekly uptrend has stalled as the weekly 5-period moving average (MA) dips to 44, $11 to reach a 15-period moving average near $37.92. Fibonacci level (fib). The weekly weak market structure (MSL) buy trigger attempts to defend at $36.43. The rifle chart’s daily downtrend has the 5-period MA down at $38.76, followed by the 15-period MA at $41.95 and the 200-period MA at $56.02. The daily lower Bollinger Bands lie at $32.52 and the upper BBs at $54.89. The daily stochastic is trying to bounce off band 5. Attractive pullback levels lie at the MSL weekly trigger level of $36.43, $34.45 fib, $30.89 fib, $29.56 fib, $26.08 fib and the $24.01 level fib.