Roblox Q1 preview: Where next for Roblox stock?

When will Roblox report Q1 2022 earnings?

Roblox is scheduled to report first quarter earnings after US markets close on Tuesday May 10.

Roblox Q1 earnings preview

It was much easier for Roblox to grow users, improve engagement and encourage people to spend more on its digital currency Robux when people were stuck at home during the pandemic. But this is becoming much harder now that Covid-19 restrictions have eased and people are spending more time out of their homes and less time gaming.

Roblox is expected to have added 4.7 million Daily Active Users (DAUs) in the first three months of 2022 to average 54.2 million in the first quarter. Importantly, Roblox has already revealed that DAUs averaged 54.7 million in January and 55.1 million in February. That suggests it could beat expectations, although things may have been much tougher in March as this is when fears about the Omicron variant started to wane.

Roblox was originally popular with a younger audience under the age of 13, but its appeal has broadened over the years and the balance has now shifted as the majority of its users are now older than that. Attracting older users is a key driver to improving monetisation and maintaining growth.

User growth will also vary region-to-region. Roblox saw DAUs in North America steadily drop during 2021 and while they are forecast to rebound sequentially in the first quarter, they are set to remain over 5% lower than a year ago. That reflects the unwinding of the pull-forward in users during the pandemic over the last two years. That is in contrast to steady growth in Europe and a much quicker rise in users across APAC and the rest of the world.

Notably, markets believe user growth will slow significantly in the second quarter and that Roblox will only add 1.6 million DAUs.

Bookings, which represents the amount of its Robux digital currency that users have bought to transact on its platform, is forecast to dip 0.6% year-on-year to $648.2 million. The numbers from the prior year will are flattered by strong growth, but this will also reflect a drop in spending on gaming as Covid-19 restrictions have eased and a broader tightening of purse strings as the cost of living surges.

Wall Street forecasts revenue will rise 45% year-on-year to $562.8 million in the first quarter. While strong, that will mark a significant slowdown in growth amid tough comparatives. Analysts anticipate Roblox will report a net loss per share of $0.03 in the quarter, turning from the $0.58 profit reported the year before.

Where next for RBLX stock?

Roblox shares have been in freefall since peaking six months ago and the latest leg of the downtrend pushed the stock below the $30 threshold for the first-time ever, although they have kept closing above this level over the past week.

We will enter unknown territory should this floor fail to hold as new all-time lows will be on the cards. The RSI is in bearish territory, but we have seen the indicator diverge from the stock in recent months to suggest a reversal could be on the cards, reinforced by the fact the current downtrend appears to be losing momentum as average trading volumes have seen a notable drop over the past five days. However, we have seen the indicator diverge from the stock before and this has failed to yield a reversal in fortunes in the past.

The first upside target for the stock is the low of the previous leg of the downtrend at $36 before it can target $43, which formed a brief level of support last month and is in-line with the 50-day moving average. From there, it can eye the $50 ceiling seen in March. Notably, the 21 brokers that cover the stock believe there is even greater upside potential and that it can recover back toward $60 over the next 12 months.

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