Roblox Closes at $54.47 Amid Child Safety Allegations and User Growth Concerns
Key Facts
Roblox shares closed at $54.47 on October 27, up from $54.37 in the previous session, according to EL7 data. Trading took place on the same day that Bleecker Street Research published a report saying it was betting against the stock and criticizing child safety measures on the platform. The firm said in its report that Roblox's changes had hurt viral growth, and estimated that growth in new active users fell by about 50% year over year in the third quarter. That percentage is Bleecker Street's estimate, not a result reported by Roblox. Investors are tracking the allegations ahead of the company's third-quarter results, scheduled for after the market closes on October 29.
The report was based on a test Bleecker Street said it conducted using age-verified accounts. It said it bought 100 child accounts for a total of $190.91, then logged into all of them from five countries within two hours. It said Roblox did not ask it to reverify ages during the test. The firm also said it found nine online marketplaces offering those accounts for sale. It added that four of the marketplaces it identified had more than 65,000 listings, figures and allegations cited by the report's author and short seller.
Roblox's official second-quarter figures present a different operating picture from the report's estimate of slowing user acquisition. Average daily active users reached 123 million, up 10% year over year, while engagement hours rose 5% to 29 billion hours. Monthly average payers reached 27 million, up 15% from the same period a year earlier. The company said the number of payers outside the United States and Canada rose 23% year over year. But growth in users and payers alone does not settle the direction of future revenue, as the company's bookings outlook gives investors another metric to consider.
Financially, Roblox posted revenue of $1.5 billion in the second quarter, up 36% year over year. Free cash flow was $294 million, up 66% year over year. In its third-quarter outlook, the company said it expects revenue to grow between 4% and 10% year over year, against a decline in bookings of between 14% and 18%. It also projected a sequential increase in daily active users, alongside continued weakness in monetization observed in the second quarter. This divergence between reported revenue growth and an expected decline in bookings is one focus for investors ahead of the upcoming results.
Reuters reported that Roblox shares were down about 33% year to date at the close before Bleecker Street's report. The news agency said it could not independently verify the report's allegations, while Roblox did not immediately respond to a request for comment. The company is scheduled to release its quarterly results after the market closes on October 29. It will hold a conference call that day at 1:30 p.m. Pacific time, or 4:30 p.m. Eastern time. The results will allow investors to compare actual third-quarter performance with the company's outlook, including its revenue and bookings trajectories.