Roblox Stock Drops 13%: Growth Concerns Emerge After Q4 Earnings

Roblox Corporation (NYSE: RBLX) stock plummeted 13% on Thursday following the release of its fourth-quarter 2024 earnings report, sparking concerns about the company's growth trajectory. The online gaming platform reported bookings growth of 21% year-over-year, missing analyst expectations, and average daily active users (DAUs) also fell short of estimates. Despite the mixed results, Roblox's revenue and net loss figures were in line with or better than expectations.

The company's bookings growth of 21% year-over-year, while still robust, was lower than the 25% growth rate reported in the fourth quarter of 2023. Additionally, average bookings per DAU increased by only 1% year-over-year to $15.97, indicating that users may be spending less on the platform than in the past. These factors, combined with the slower DAU growth, raised concerns about Roblox's ability to maintain its rapid growth trajectory.

Roblox's management attributed much of the disappointment to difficult growth comparisons with the fourth quarter of 2023, which included the PlayStation launch and a big Xbox product update, as well as a large prepaid card purchase. However, investors may be concerned that Roblox's growth momentum is slowing down, as the 21% year-over-year growth in bookings was strong but not when compared to the 25% growth rate reported in the previous year. Growth rates in DAUs and average bookings per user also declined, which could impact Roblox's future bookings growth.

Roblox's outlook for the first quarter and full year 2025 also missed expectations, with the company forecasting bookings of $1.125 billion to $1.150 billion and $5.20 billion to $5.30 billion, respectively. The midpoint of the full-year guidance was well above the analyst consensus of $5.10 billion, but the first-quarter guidance was slightly below the consensus of $1.14 billion.

Despite the concerns, Roblox's stock has gained 60% over the past 12 months, and at least six Wall Street firms have raised their price targets on the stock in 2025. JPMorgan analysts expressed optimism over mobile gaming trends and spending on consoles for 2025, backed by a strong game slate. They flagged Roblox as a top industry pick due to its combination of healthy engagement trends, ramping ads/commerce business, and free cash flow.

In conclusion, Roblox's stock dropped 13% after its fourth-quarter earnings report sparked growth concerns. While the company's bookings and DAU growth rates were still robust, they fell short of expectations, and the outlook for the first quarter and full year 2025 also missed estimates. Investors may be concerned that Roblox's growth momentum is slowing down, but the company's long-term prospects may remain strong. As Roblox continues to invest in its platform and expand its user base, it may be able to overcome these temporary setbacks and resume its rapid growth.