Analysts questioned growth objectives given at the social-media company’s investor day on Thursday and August performance that came in weaker than expected, as Roblox stock (NYSE:RBLX) continued to fall on Friday.
What Happened to Roblox Stock?
Roblox stock (NYSE:RBLX) dropped as high as 11% to an intraday low of $38.81 before closing down 9.2% at $39.50 on Friday. The stock took a knock on Thursday when the business conducted an investor day and announced August numbers, and shares are down 13.2% for the week.
Is Roblox, the Pioneer of the Metaverse, Ready for Stiff Competition?
Wedbush analyst Nick McKay, who has a neutral rating and a $34 price target on Roblox stock (NYSE:RBLX), was suspicious of several of the company’s new features, saying, “we believe that some of its initiatives might prove to pose a problem to continuing high-growing development.”
Roblox executives, for example, stated on Thursday that they would begin giving additional avatar customization, the ability to destroy in-game items, in-game voice chat, a non-browser PC format, and immersive marketing for users over the age of 13.
“We are particularly concerned that Roblox’s gaming engine is strong enough to retain older and richer customers,” McKay added. “In our judgment, the visuals on the Roblox platform looked equivalent to those seen on gaming consoles a decade or more ago in certain instances, and some of the projects it highlighted during its analyst day appeared to be already-proven ideas from other platforms.”
According to McKay, Roblox also faces competition for its gaming engine from firms such as Unity Software Inc. U, +3.71%.
“Game engines like Unity are more powerful than Roblox’s engine and are as democratic,” McKay said. “This suggests that a firm like Unity might undercut Roblox’s economic model and share a higher part of receipts with creators than Roblox does.”
Given that Unity now produces 70% of all games, this seems to be a potential concern for Roblox.
Twelve of the 23 analysts that follow Roblox stock (NYSE:RBLX) have a buy recommendation, eight have hold ratings, and three have sell ratings, with an average target price of $45.06, down from $45.44 recently. According to FactSet data, in June 2021, all eight analysts tracking Roblox had buy-grade recommendations, which it held for six quarters.
Roblox stocks (NYSE:RBLX) are down 61.7% year to year, compared to the S&P 500 index SPX, +0.69%, and the tech-heavy Nasdaq Composite Index COMP, +0.76%.
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