Roblox Q2 Warning Sends Gaming, Metaverse ETFs Down

The creator of the popular gaming platform noted “an unseasonable decline” in user engagement.

Shares of Roblox, creator of the popular gaming platform, plummeted by more than 20% on Thursday after the company provided downbeat earnings guidance for the second quarter and warned that user engagement was flagging. 

The company, which is at the intersection of gaming and the metaverse—a futuristic, more interactive version of the internet—pulled down many of the 131 U.S.-listed exchange-traded funds that hold its stock. 

The Roundhill Ball Metaverse ETF (METV), the Bitwise Web3 ETF (BWEB) and the Roundhill Video Games ETF (NERD), have the largest weightings in the stock, with allocations of more than 7%.  

In a shareholder letter posted along with its earnings press release, Roblox noted that user engagement on its platform during the first quarter “exhibited an unseasonal decline” that “was broad-based across regions, ages, and platforms.” 
 
Q1 daily active users of 77.7 million and hours engaged of 16.7 billion were up 17% and 15%, respectively, year-over-year, less than the 20% that the company would have liked.  

Bookings, the company’s preferred sales metric, also fell below that mark during Q1 with growth of 19% to $923.8 million. 

Roblox lowered its booking forecast for the full year by 4% to $4.05 billion—equal to growth of 15% compared to last year. 

Improvements  

Despite the first quarter headwinds, the Roblox sounded an optimistic note. 

“Our teams have been hard at work identifying opportunities to drive growth, and we have seen encouraging signs during the back half of April and early May with DAUs, Hours, and Bookings in the US & Canada back to around 20% year-over-year or higher,” the firm said. 

Analysts are largely bullish on the company. 

Of the 33 analysts tracked by Bloomberg, 24 have buy ratings on the stock, six have hold ratings, and three have sell ratings. 

The average 12-month price target is $48—60% higher than the current share price.