Roblox is set to report earnings after the market closes on Monday.
Courtesy of Roblox
Roblox is set to report third-quarter results after the market closes on Monday. The company’s earnings report comes just as Wall Street has begun buying into the tech industry’s metaverse aspirations.
Meta Platforms (ticker: FB), the company formerly known as Facebook that plans to change its ticker to “MVRS” on Dec. 1, brought the metaverse into the mainstream after CEO Mark Zuckerberg pitched his plans to invest billions building it in the coming years. But Roblox, which was founded in 2004, has been discussing the concept for some time. In the company’s filings with the Securities and Exchange Commission ahead of its March 10 initial public offering, the word metaverse appears more than a dozen times.
Roblox is less a traditional videogame and more a platform that offers tools for users, predominantly children, to design and interact in virtual worlds. CEO David Baszucki in the IPO filing described the company’s offerings, as “shared online experiences where people can interact in 3-D simulated virtual environments, sometimes referred to as a metaverse.”
“Futurists and science fiction writers have been imagining the metaverse for decades,” he added. “As computing power, networking bandwidth, and human interface technologies improve, metaverses will become more and more pervasive. We feel lucky to be part of this evolution. And as we embark on our next 15 years, I look forward to the change that is inevitable as well as the things we feel will always be the same.”
While some on Wall Street may have glossed over such metaverse talk earlier this year, they’re certainly listening now. Nvidia (NVDA), which ended October with a $639 billion market capitalization, surged 16% this past week, adding more than $100 billion in market capitalization along the way. Analysts at Wells Fargo argued the metaverse could offer a $10 billion market opportunity for the chip maker over the next five years.
Though Roblox stock has rallied about 20% in the past six months, shares are down 3.3% since their close on Oct. 27, the day before the Facebook parent company became Meta. The stock is off 25% from an intraday high of $103.87.
A widespread outage of Roblox’s platform, which the company said began on Oct. 28 and lasted until Halloween, dented shares in the past week. CEO Baszucki wrote in an update that a subtle bug in Roblox’s back end service communications caused Roblox’s infrastructure to become overwhelmed. He said it was not due to an influx of users overloading the system. The company was hosting a Halloween-themed promotion with Chipotle Mexican Grill (CMG) from Oct. 28 to Oct. 31.
While Roblox’s plans for the future now have investors’ ears, the earnings report on Monday will provide a better look at how usage trends shifted as schools reopened and lockdowns lifted. Wall Street’s consensus estimate calls for $636 million in net bookings, a form of adjusted revenue that’s popular with videogame investors because it gives a more accurate read on sales of digital goods. The five analysts surveyed by FactSet have an average estimate for GAAP net income of $16.7 million.
The latest round of earnings reports—from Activision Blizzard (ATVI) to Peloton Interactive (PTON)—haven’t been kind to stay-at-home stocks which had benefited from Covid-19 lockdowns. Roblox will look to buck that trend on Monday.
