Roblox: Shares Drop Sharply on Mixed March Key Metrics

In its March 2023 key metric release, Roblox RBLX announced that daily active users, or DAUs, increased 26% year over year to 66.2 million, bookings grew 25%-29% on a constant currency basis, and bookings per daily active user changed by a range of negative 1% to 3% after adjusting for the strong dollar. Roblox shares were down about 12% in early trading on April 17 as we believe that the market overreacted to the user base slightly declining sequentially from 67.3 million DAUs in February. The long-term picture for the firm remains impressive as Roblox had only 23.6 million DAUs in the first quarter of 2020. We are maintaining our $65 fair value estimate.

The continued growth in engagement, up 21% to 4.7 billion hours in March, remains impressive as engagement for all of the first quarter of 2020 was only 4.9 billion hours. This level of engagement implies each user was on the Roblox platform for 71 hours in March, or over two hours and 20 minutes per day. The level of engagement demonstrates that Roblox’s promotion of games with longer engagement appears to be paying off and should improve retention of players as they age.

While the key metrics help provide an interim picture of how the firm is doing, the lack of monthly data around the age of the user base, regional metrics, and other data points make the interim picture less useful as Roblox expands. Management apparently agrees with our viewpoint, as this release will be the last one from Roblox.