CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 71% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 71% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

Roblox shares hit by Q1 losses

The gaming company unveiled first-quarter results last week

Losses at Roblox rose 16% to $161.7 million in the first-quarter from $136.1 million last year as the benefit of Covid-related bookings waned.

However, revenues at the popular US children’s gaming platform jumped 39% in the first-quarter to $537m, compared to the same period last year ($386.9 million).

That said, Roblox admitted it expects to post losses “for the foreseeable future” even as it anticipates “generating net cash from operating activities”. Shares in the gaming company fell 4% on the day of results, although they recovered some ground on Monday.

"We remained focused on delivering our innovation roadmap to unlock the full potential of the Roblox platform and drive long-term returns for investors," David Baszucki, Roblox’s chief executive officer told investors. "Over the past two quarters, we have launched a number of notable innovations, including spatial voice and layered clothing that will continue driving user growth, engagement and monetization."

Roblox’ Covid fillip wanes

Hours engaged increased by 22% to 11.8 billion from the same period in 2021, while daily active user numbers rose by 28% to 54.1 million in the quarter. Roblox says two-thirds (77%) of its users hail from outside North America, while users aged over 13 increased by 38% year-on-year and accounted for over half of daily active users.

However, bookings in the first-quarter fell 3% to $631.2 million due to tough comparative figures in the same period last year when stronger Covid restrictions were in place. These figures were lower than analysts had forecast.

In the first-quarter, free cash flow stood at $104.6 million, while earnings before interest, tax, depreciation and amortisation fell to $67.9 million. Management says both figures fell “significantly” compared to last year as the company invested in headcount, infrastructure and developer expenses but bookings remained flat.


Riding the Metaverse wave

Roblox looks set to continue its investment going forward and is focusing heavily on the metaverse, which management believe is “an uncommon opportunity”. Indeed, the company told investors in its shareholders’ letter that it thinks this “new form of communication” will change how people connect with each other and that over the long-term, the opportunity is ultimately “potentially larger and more profound” than other innovations in social networking.

Analysts at broker Jefferies raised their second-quarter earnings forecasts to losses of -$0.25 per share (from $0.30 a share). They currently have a $50 price target on the shares.

Roblox shares are down 51% in the past year to $34.39 and remain well off their highs of $141.60 seen in November 2021. They could travel the crest of the metaverse wave and many other US companies, such as Meta and even Wendy’s, are investing heavily in the virtual world. However, with losses likely to continue for some time, it’s unclear when the shares may receive a much-needed short-term boost.

This information has been prepared by IG, a trading name of IG Markets Ltd and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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