Shares fell 11% at one point on the day after the company released disappointing user stats for May.
The company said that daily active users (DAUs) declined 1% in May from April. Further, bookings per DAU are estimated to be down 2% to 3% vs. the same period a year ago.
The company’s 43 million DAUs in May were up 28% year over year, but down sequentially from April.
That said, while analysts acknowledged the softer-than-expected data, they’re not exactly panicking at the moment.
To be fair, companies like Roblox, Electronic Arts (EA) - Get Electronic Arts Inc. Report, Take-Two Interactive (TTWO) - Get Take-Two Interactive Software, Inc. Report and other gaming companies experienced strong user growth last year due to the pandemic. So some softness should be expected.
But should traders also expect further softness in the stock price of Roblox?
Roblox traded lower in early May as other growth stocks were enduring a painful bear market. However, the stock did a good job not retesting the March low or the day-one low when the company made its public debut.
Even better, shares ripped to new all-time highs on a strong rally after its pullback last month.
The pattern isn’t great at the moment, but the context isn’t that bad either.
From the bulls’ perspective, I wouldn’t like the way that shares broke down from the falling wedge pattern (blue lines) that Roblox stock was sporting during its mild (yet reasonable) pullback to the 10-day and 21-day moving averages.
That was actually pretty attractive, especially if the stock managed to break out, not down, from that area.
On the flip side, shares pulled back to the 50-day moving average and gave bulls a hard bounce. Further, the stock is giving us a doji candle (so far) on the day, while trying to hold the April high near $83.50, as well as the 10-month moving average.
Basically, the stock is back to where it was a few months ago. In that context, it's not that bad.
On the upside, getting above and staying above $83.50 is the first step. Above that puts Wednesday’s high in play, followed by a test of the 10-day and 21-day moving averages.
On the downside, see that Roblox stock holds the 50-day moving average and Wednesday’s low. Below puts the $77.75 breakout level in play. Below that and shares could drift into no man’s land for a bit.