The Ratings Game: Roblox stock drops as Wall Street sees a ‘Pandora’s box of problems’

by | Sep 16, 2022 | Stock Market

Roblox Corp.’s stock continued to sell off Friday as analysts questioned growth initiatives presented at the social-media company’s investor day on Thursday and August performance that came in lower than expectations. Roblox
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-9.20%
shares fell as much as 11% to an intraday low of $38.81, and closed down 9.2% at $39.50 in Friday trading. The stock was also hit Thursday after the company held its investors day and released August figures, and shares are down 13.2% for the week.

Wedbush analyst Nick McKay, who has a neutral rating and a $34 price target, was somewhat skeptical of some new features the company offered and said “we think that several of its strategies could prove to pose a challenge to continued growth at a high rate.” Read: Is metaverse pioneer Roblox ready for fierce competition? This analyst doesn’t think so For instance, Roblox executives announced Thursday they will start offering new avatar customization, the ability to destroy in-game objects, and in-game voice chat, a non-browser PC format, and immersive ads intended for users older than 13. “In particular, we are skeptical that Roblox’s game engine is sufficiently robust to enable it to retain older and wealthier users,” McKay said. “In our opinion, the Roblox platform’s graphics seem comparable to those seen on consoles a decade or more ago in certain situations, and several of the initiatives it presented at its analyst day appeared to be already-proven concepts from other platforms.” Roblox also faces challenges for its game engine from companies like Unity Software Inc.
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-6.57%,
McKay said. “Game engines like Unity are more robust than Roblox’s engine, and are equally democratic, suggesting that a company like Unity could undercut Roblox’s business model and share a greater portion of receipts with developers than is shared by Roblox,” McKay said. “Given that an est …

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