J.P. Morgan has downgraded Roblox stock to a neutral rating due to some variable performances in bookings that suggest “more modest” sales growth and margins for the children’s gaming platform in the coming year. This comes after Roblox announced it fell short of some core profitability measures during a recently held earnings call.
As explained by Seeking Alpha, it was expected that bookings would grow “in the high teens in 2023.” However, it now appears that bookings for the end of 2022 will experience “a mid-teens growth rate that should continue through the new year.”
According to industry analyst David Karnovsky, the company has shown improvements over the last three months, but the overall result was disappointing and more volatile than initially expected. Still, Karnovsky said “we continue to be believers” in the long-term view of Roblox, seeing the company as an emerging leader in the metaverse space. Although, he explained that the upside of Roblox shares is “limited” due to ongoing volatility.
Despite this downgrade, Roblox stock actually managed to experience a slight bump following this announcement. Roblox shares increased from $30.92 on November 9th to $36.74 by the time the stock market closed on November 11th.
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