The price of Roblox stock is dropping nearly 15% in pre-market trading action today after the gaming company reported some disappointing financial figures for the second quarter of the 2022 fiscal year.
During the three months ended on 30 June, the California-based metaverse startup reported total revenues of $591.2 million resulting in a 30% jump compared to a year ago and a 10% jump versus the previous quarter. However, the figure fell short of Wall Street’s consensus estimate of $626.2 million for the period.
Meanwhile, the firm’s bookings experienced a 4% year-on-year decline as they landed at $639.9 million and the number was also slightly lower than the consensus estimate from analysts of $644.4 million for the quarter.
This marks a turning point for the gaming company as it does not appear to be exempt from being impacted by what could be the beginning of a recessionary cycle in the United States and other latitudes.
Roblox Experiences a Quarter-On-Quarter Bump on Key Operating Metrics
During the second quarter, daily active users at Roblox (RBLX) grew 21% compared to a year ago at 52.2 million while the number of hours engaged, another key operating metric, went up 16% on a year-on-year basis as well.
However, on a sequential basis, Roblox’s DAUs fell by 1.9 million while the number of hours engaged also went down by 0.5 billion as the company appears to be struggling to keep users glued to their phones and computers in a post-COVID environment.
Meanwhile, Roblox’s losses deepened during this first quarter as the company reported a $176.4 million GAAP net loss compared to the $140.1 million it shed the previous year. Moreover, the firm produced negative free cash flows during the period as it spent more money on acquisitions and capital expenditures
On a per share basis, the company lost 30 cents or 5 cents more than it did in Q2 2021 while analysts were expecting a per-share loss of 25 cents.
The fact that various operating metrics are performing negatively in a post-COVID environment on a sequential basis is possibly scaring investors and contributing to today’s sharp downtick in Roblox stock price.
Analysts’ Coincide that Gaming Demand is Expected to Slow Down
In regards to the company’s quarterly performance, Corey Barrett from TMT Research stated: “We have seen impacts across the video game space due to changes in consumer discretionary spend, and that appears to be somewhat more pronounced in the free-to-play genre and mobile gaming”.
Data from Ampere Analysis indicates that the global games and services market is expected to experience a 1.2% year-on-year contraction – the first annual decline in more than a decade as the cost of living is rising for millions of households across the world.
In addition, data from research firm NPD indicated that spending on video games during the second quarter of the year fell to $12.35 resulting in a 13% decline compared to the same period a year ago.
According to analysts, even though these figures continue to be above pre-COVID levels, the current macroeconomic backdrop, which includes elevated inflationary pressures, may affect the performance of gaming companies down the road if consumers start to prioritize other expenditures.
Just yesterday, NVIDIA, a well-established manufacturer of gaming components for personal computers and other devices, warned investors that its revenues for the second quarter of the 2022 fiscal year will fall short of the management’s initial expectations due to “macroeconomic headwinds”.
Metaverse Projects Are Still Considered an Appealing Long-Term Bet
Roblox’s innovative metaverse platform is still at an early stage of its development and adoption of this kind of game continues to advance at a relatively slow pace compared to other segments of the industry as users are still getting accustomed to how these virtual realms work.
However, estimates from consulting firm McKinsey & Co. point to the metaverse being worth nearly $5 trillion by the end of 2030.
Other projects in the blockchain space have also been developing their version of the metaverse as is the case of Battle Infinity, a crypto project that just completed a pre-sale of its native token IBAT to secure the required funding to keep moving forward with its roadmap.
Investors can find out more about this innovative blockchain game by visiting their official website or joining their Telegram group.
Other Related Articles:
- List of Metaverse Stocks to Invest in 2022
- Gaming Companies to Invest in – eToro Portfolio Returns 40%
- Quick Guide to Invest in GameStop (GME)
This article was written for Business 2 Community by Alejandro Arrieche.
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