Roblox shares fell 25% Wednesday morning after a worse-than-expected earnings report, making the explosively popular Gen-Z favourite one of the latest victims of jittery investors penalising tech businesses for failing to meet sales projections.
Roblox shares were trading at $55, close to a record low of $53.63 recorded last month, after it revealed a worse-than-expected loss of $143 million in the fourth quarter after the closing Tuesday, nearly tripling the $59 million loss one year earlier.
Sales increased by 83 percent year on year to $568.8 million, but fell short of the $604 million median analyst projection.
Morgan Stanley analyst Brian Nowak said in a letter to clients on Wednesday that the “disappointing” statistics highlight the challenges that many firms that enjoyed significant growth during the epidemic would face when consumer behaviour shifts with the economy reopening.
Although daily active users increased 32 percent year over year to a new high of 54.7 million, the number of users declined from the previous quarter in North America, the company’s largest region, according to Benchmark analyst Mike Hickey.
In its shareholder letter, Roblox addressed the uncertainties, stating that growth will be “toughest” in the United States and the United Kingdom, where relaxing Covid regulations have allowed more individuals to return to work and school.
The stock drop on Wednesday wiped off more than $10 billion in market value, and its shares have now fallen more than 60% from an all-time high in November, the same month the tech-heavy Nasdaq set a new high.
Roblox, located in San Mateo, California, went public at the height of the epidemic, alongside Airbnb and DoorDash, with its shares soaring more than 50 percent after trading began in March. According to the platform, which allows users to develop and construct their own online games, almost two-thirds of youngsters in the United States between the ages of 9 and 12 play its games.
Roblox isn’t the only tech stock that has plummeted Wednesday morning following a weaker-than-expected earnings report. Shopify, a Canadian online retail platform whose shares doubled during the epidemic, fell more than 18 percent as the company cautioned that sales growth will likely decelerate in the second part of this year. The stock, like Roblox, is currently down around 60% from its all-time high in November.
