What Happened?

Shares of gaming metaverse operator Roblox (NYSE:RBLX) fell 25.2% in the pre-market session after the company reported mixed fourth quarter results. Its daily active users missed and its guidance for 20% bookings growth in 2025 fell short of Wall Street's lofty expectations, sparking fears about decelerating growth. This is after video game peer Electronic Arts also reported a lackluster quarter.

It wasn't all bad though, as sales and EPS beat Wall Street's expectations in the quarter. Still, the market is focused on the guide.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Roblox? Access our full analysis report here, it’s free.

What The Market Is Telling Us

Roblox’s shares are somewhat volatile and have had 13 moves greater than 5% over the last year. But moves this big are rare even for Roblox and indicate this news significantly impacted the market’s perception of the business.

The biggest move we wrote about over the last year was 9 months ago when the stock dropped 26% on the news that the company reported weak first-quarter earnings results. Its full-year bookings guidance of 15% year-on-year growth missed analysts' expectations, and investors are punishing the stock because management said it would grow at 20%+ annually for the next few years at its November 2023 Investor Day. On top of that, the company announced it would start calculating adjusted EBITDA differently, raising some questions. Overall, the results could have been better.

Roblox is up 12.5% since the beginning of the year, but at $66.21 per share, it is still trading 12.3% below its 52-week high of $75.47 from February 2025. Investors who bought $1,000 worth of Roblox’s shares at the IPO in March 2021 would now be looking at an investment worth $952.81.

Unless you’ve been living under a rock, it should be obvious by now that generative AI is going to have a huge impact on how large corporations do business. While Nvidia and AMD are trading close to all-time highs, we prefer a lesser-known (but still profitable) semiconductor stock benefiting from the rise of AI. Click here to access our free report on our favorite semiconductor growth story.