Roblox Earnings: Weakening Engagement Has Weighed on Growth; Fair Value Estimate Reduced

Roblox delivered 19% year-over-year bookings growth during the first quarter, meeting the midpoint of management’s guidance. However, player engagement tailed off during the quarter. While management believes it has made changes to address the underlying causes of this shift, it provided a tepid outlook for second-quarter bookings growth (about 13% at the midpoint) and cut its full-year growth outlook to about 15% from 20%. Ups and downs are expected, and we’ve trimmed our growth expectations, cutting our fair value estimate to $50 from $60. We still believe that the market is overly discounting Roblox’s long-term potential and that the shares are attractive.