The share price of the open-world gaming platform Roblox dropped by more than 26% Wednesday following the release of its worse-than-expected earnings report. The company's shares were trading as low as $55 per share, close to the record low of $53.63 per share that was set last month.
For its fourth quarter, the company reported a loss of $143 million, nearly triple the $59 million loss it reported over the same period last year. The loss, which equates to about 25 cents per share, was larger than the 13 cents per share expected by Wall Street.
Roblox reported bookings of $770 million, lower than the $772 million expected. Sales were up by 83% year-on-year to $568.8 million but were still lower than the average analysts' estimate of $604 million for the quarter. The company reported a 33% increase in its daily active users for the quarter to 49.5 million.
Roblox, which operates a virtual world where interact freely, is the first major company developing a metaverse to go public. The company also sells its own virtual currency, which players can use to purchase digital items within its games.
Roblox CEO David Baszucki assured shareholders that there are still a lot of opportunities for the company to grow its profits within its platform. He added that the company has yet to monetize on things such as virtual advertising and immersive virtual shopping. Baszucki told investors that the company is making quality user growth its main priority instead of rapid monetization. He explained that it was important for Roblox to create a "safe and civil" platform to increase user engagement.
Morgan Stanley analyst Brian Nowak said Roblox's poor performance only underscores the difficulties faced by companies that saw massive growth during the pandemic. As cases decline and people go back to their pre-pandemic lives, there will be a major shift in consumer behavior.
Although daily active users increased 33% year over year to a new high of 49.5 million, the number of users in North America, the company's largest region, decreased from the previous quarter.
Roblox addressed the uncertainties, noting that growth will be "toughest" in the United States and the United Kingdom, where Covid restrictions have been eased, allowing more individuals to return to work and school.
The stock decline on Wednesday wiped away more than $10 billion in market value, and its shares have now fallen more than 60% from their all-time high in November.