Roblox Investors Could Be Playing a Dangerous Game

tech.hindustantimes.com:

A few weeks of improving trends is giving hope to Roblox Corp.’s investors that the worst of the gaming platform’s post-pandemic slowdown is now behind it. They might want to hit pause on that notion.

Roblox — known by parents everywhere as the cultural phenomenon whose virtual playgrounds have captivated their children — posted predictably solid results late Monday (before following up with its earnings call for analysts early Tuesday). The company’s bookings — the industry’s primary measure of sales – climbed 28% from a year earlier to $637.8 million for the quarter ended in September, and daily active users for period rose 31% to 47.3 million.

But what seized the market’s attention was a sign that the current quarter wasn’t going to see as much of a post-pandemic growth slowdown as anticipated. For the first 27 days of October, before an unusual three-day outage at month’s end, daily active users shot up by 43% year-over-year. The healthy increase surprised Wall Street, which had expected Roblox’s growth rate to slow markedly now that users were no longer confined at home due to the pandemic. Shares skyrocketed more than 30% on Tuesday morning.

But do the October figures mean the bottom is in? I’m not so sure. For starters, it will be challenging to sustain pandemic-level gains, no matter what the month of October delivered. Roblox’s growth rate is still down significantly from the pandemic peak, when it was nearly doubling its user base each quarter, and I expect headwinds for several more quarters as the pandemic ebbs and children and adults spend more time outside and less time online.

Roblox’s valuation already is hovering in nosebleed territory. At Monday’s close, before the earnings announcement, the company was