Roblox, No Stock Price Rebound Catalyst for Now... Requires Mid- to Long-Term Approach

Stock Prices Drop About 50% Since Early Year
January's Expected Key Operating Indicators Also Weak

[Asia Economy Reporter Minji Lee] Roblox's stock price fell sharply after posting weaker-than-expected results for the fourth quarter of last year. The decline continues as concerns grow that growth will slow down with most activities returning to normal after the COVID-19 pandemic. Although the number of users is increasing in markets outside Europe and the United States, it is analyzed that there are no short-term positive factors to trigger a stock price rebound.

On the 20th, Roblox's stock price stood at $49.72, down 49.68% since the beginning of the year. It has fallen more than 60% compared to the 52-week high of $141.60. This reflects concerns about slowing growth as the earnings failed to meet expectations. In addition, external issues such as interest rate hikes overlapped, resulting in a sharp decline.

Roblox recorded payment revenue of $770 million in the fourth quarter of last year, a 20% increase compared to the same period last year, but it fell short of the market expectation of $786 million. GAAP-based earnings per share (EPS) also showed a loss of $0.25, below the market expectation of -$0.12. In terms of profitability, costs accounted for about 92% of total revenue, similar to the previous quarter (92%). Although the net profit margin (-24.7%) declined compared to the previous quarter, adjusted EBITDA relative to total payment revenue improved to 21.8%.

Key operating indicators, daily active users (DAU) and usage time, were 49.5 million and 10.8 billion hours respectively, falling short of market forecasts of 50.5 million and 11.8 billion hours. This is analyzed as a downward stabilization of growth rates due to normalization after the COVID-19 pandemic. The forecast for January is also weak. DAU is expected to be 54.7 million, and usage time 4.2 billion hours. Total revenue is predicted to grow 2-3% to $220 million to $223 million.

Wonju Lee, a researcher at Kiwoom Securities, said, "Above all, the DAU and usage time indicators in the Americas region showed a year-on-year decline for the first time. While cost increases in early-stage growth companies are acceptable to investors, the decline in operating indicators in the Americas, which is a leading indicator for other regions and the main profit-generating region, was fatal to the stock price."

Accordingly, it is expected that expectations for short-term growth will need to be adjusted. This is because the expansion of normalization in key regions such as Europe and the United States will inevitably have a negative impact on Roblox users in the future.

However, global market expansion and the increase in users aged 13 and over are positive from a mid- to long-term perspective. In the fourth quarter of last year, DAU and usage time in the Asia-Pacific region grew 100% and 112% year-on-year, partially offsetting the impact of the shrinking North American market. The proportion of 'Aged up' content, where users aged 13 and over are the main user base, among the top 1,000 contents also grew to 40%, strengthening the platform's position as one that covers all age groups.

It is also positive that the platform is expanding into music, brand, and education sectors to focus on acquiring new users. Last year, the company signed partnerships with a total of 12 brands and hosted six music events. Additionally, collaborations with brands such as Gucci, Vans, and Nike are helping the company focus on increasing users. Rather than focusing on monetization, the primary goal is to connect consumers and brands through immersive 3D interactions. Jiyong Lim, a researcher at NH Investment & Securities, said, "Expectations for short-term growth should be lowered, but considering new business momentum and mid- to long-term growth potential, the stock price level is attractive. The point at which concrete monetization plans and revenue diversification are realized will be a signal for a stock price rebound."

This content was produced with the assistance of AI translation services.