Breaking Down Roblox's Q3 Earnings Implosion: 'These Numbers Are A Disaster'

When an online video gaming company announces good user metrics, it does not always translate into better earnings. That applies to Roblox Corp RBLX, which is the PreMarket Prep Stock of the Day.

Roblox Rallies Off Good User Metrics: On Oct. 17, Roblox announced 2022 key metrics. Its daily active users totaled 57.8 million, 23% higher year over year. Estimated bookings were between $212 million and $219 million, which was 11%-15% higher year over year.

That instigated a rally from $35.56 to $42.61, one of the stock's best days in months. Seven days later, the issue posted the high for the recent rally at $47.67. The following day, it posted the highest close for the rebound at $46.50.

Street Sells Ahead Of Q3 Report: Two factors brought the issue off that elevated level. First of all, it was dragged down by the malaise of the growth technology sector. Also, nervous investors decided to lighten up ahead of its third-quarter report.

As a result, the issue posted its lowest close for the retreat on Tuesday at $39.14.

Roblox's Q3 Miss: Before the opening, Roblox reported quarterly losses of 50 cents per share, which missed the analyst consensus estimate of negative 33 cents by 51.52%.

PreMarket Prep's Take: When it was being covered on the show Wednesday, Roblox was trading in the red by over $5 at the $33.50 area.

“These numbers are a disaster — shocking after giving out good metrics only a few weeks ago,” said co-host Dennis Dick. “I am not touching this stock. [I'm] sticking with selling tech on rips and buying value on dips.”

Both of the hosts of the show emphasized the importance of Roblox holding its Oct. 11 low of $33.20 during the regular session.

RBLX Price Action: After a much lower opening Wednesday ($35.31 vs. $39.31), Roblox was able to rally to $36.75 and reversed course.

The stock continued to make new lows for the session and ultimately lost 20.94% of its value Wednesday, closing at $30.92. 

The daily support level based on the daily charts is the June 23 low of $30.50.

The discussion on Roblox from Wednesday's show can be found here:

Photo via Shutterstock.