Roblox’s (RBLX) Pricey Valuation Puts The Microscope On Its Slowing Bookings Growth In August
3:01 pm Friday, September 16th, 2022
Roblox (RBLX) is selling off today after the video game company’s August metrics showed a couple of rough patches. Today’s disappointing markets are also adding to RBLX’s sizeable downward move.
In August, average bookings per daily active user (ABPDAU) fell 14-16% yr/yr and slightly from July to $3.89-3.96. Although the dip month/month is expected, due to students returning to the classroom (ages 9-12 is RBLX’s most popular cohort), the double-digit drop yr/yr was a surprise. It was also a surprise to see bookings growth continuing to decelerate. In August, the figure grew just 5-7% yr/yr, a meaningful slowdown from +8-10% growth in July. This trend is also present on a quarterly basis, with Q2 bookings dropping 4% yr/yr to $639.9 mln, a slight deterioration from a 3% dip yr/yr in Q1.
On the plus side, DAUs continue to climb, jumping 24% yr/yr to 59.9 mln in August. However, with bookings growth cooling off considerably while DAUs maintain a healthy expansion, it is no wonder that ABPDAU remains in a downward trend for much of the year. The metric has now seen at least a 20% tumble yr/yr in February, April, May, and July.
There are still positives on the horizon that management discussed during Investor Day toward the end of close yesterday.
This 3D advertising is a unique differentiator from ad-based social media platforms like Snap (SNAP) and Meta Platforms (META), which have started seeing some softness in advertising spending.
RBLX’s long-term vision is to replicate the real world through its brand partnerships instead of dabbling in the non-fungible token (NFT) marketplace.
RBLX remains a healthy player for the long run, as gaming trends remain higher than before the pandemic. However, in the short run, bookings growth may continue to soften. Game publishing titan Activision Blizzard (ATVI), which is to be acquired by Microsoft (MSFT), has seen video game spending fall yr/yr every month this year. As a result, RBLX may continue facing short-term selling pressure, especially given its pricey valuation of ~9x forward sales.
