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The Ratings Game: Roblox stock rockets 20% on ‘impressive’ turnaround from yearlong slide

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Roblox Corp. shares turned in their best performance in nearly a year Monday, after the youth-oriented social-media platform reported figures for September that suggested a turnaround from a yearlong slog.

Roblox
RBLX,
+19.83%

reported September bookings and daily active user figures Monday that suggested a better-than-expected trajectory for the quarter, and shares took off.

By early afternoon, the stock’s price had climbed nearly 23% to an intraday high of $43.66, and closed up 19.8% at $42.61. It was the stock’s best one-day performance since Nov. 9, 2021, when it soared 42% after the company turned in October growth despite a Halloween weekend outage.

Not counting Roblox shares closing more than 50% above their direct listing price of $45 on their first day of trade, March 10, 2021, Monday’s performance was the stock’s third best on record. Other comparable high-performing days for Roblox shares are May 12, 2022, when shares finished up 19.2%, and May 11, 2021, when shares closed up 21.3%, according to FactSet data.

Early Monday, Roblox estimated bookings of $212 million to $219 million for September, even as a stronger dollar
DXY,
-1.08%

against the euro
USDEUR,
-0.01%

and the British pound
USDGBP,
-0.02%

adds an estimated 600-basis-point headwind to the year-over-year bookings growth rate.

Cowen analyst Doug Creutz said in a Monday note that the September performance topped his earlier estimate of $210 million, putting Roblox on track to top the consensus for the quarter despite negative seasonal trends from the target audience of tweens returning to school in the month.

“At the July, August, and September midpoints, bookings for the quarter would be $695.5 million, just a touch below our $698 million estimate and a bit ahead of consensus $690 million,” Creutz wrote in a note that had some optimism about Roblox despite the analyst’s underperform rating and $31 price target on the stock.

For more: Is metaverse pioneer Roblox ready for fierce competition? This analyst doesn’t think so

Jefferies analyst Andrew Uerkwitz, who has a hold rating and a $40 price target, called September bookings “impressive” in that the 11% gain was “mostly driven by better than anticipated monetization per hour engaged.”

Roblox reported 57.8 million daily active users, or DAUs, for a gain of 23% year-over-year, and 4 billion hours of engagement, up 16% year-over-year. But the most important gain was from the amount of money Roblox generated during those engaged hours.

While engagement was in line with Creutz’s estimate, the analyst said “spend per hour was ~5% ahead our expectation,” and that daily hours of engagement and spend per hour of engagement “demonstrated better sequential growth vs the prior year periods.”

Read: Wall Street sees a ‘Pandora’s box of problems’ for Roblox

Roblox is expected to report third-quarter results on Nov. 7, with analysts polled by FactSet expecting a loss of 30 cents a share on revenue of $692.5 million and bookings of $690.9 million. Earnings reports this year have largely disappointed on bookings, which the company defines as “revenue plus the change in deferred revenue during the period and other noncash adjustments.”

“Bookings” are important to Roblox because its main business is selling virtual currency on its site that may be considered deferred revenue, but the metric has largely become synonymous with disappointment at Roblox in 2022.

The stock logged its worst one-day performance since it went public after reporting weaker-than-expected growth in bookings in February, dropping more than a quarter of its value in one trading session, once it became apparent that once-stuck-inside kids were finding other ways to spend their time as COVID-19 pandemic restrictions began to lift. In May, Roblox shares came under fire after the company again reported an unexpected decline in bookings, and again in mid-September when August metrics were released.

In-depth: Five things to know about Roblox, the tween-centric gaming platform

Of the 25 analysts who cover Roblox, 12 have buy-grade ratings, eight hold ratings, and five sell ratings, along with an average target price of $42. Even with Monday’s gains, Roblox shares are down 58.7% for the year, compared with a 22.8% fall in the S&P 500 index 
SPX,
+2.65%
,
and a 31.8% drop in the tech-heavy Nasdaq Composite Index 
COMP,
+9.76%

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