Metaverse play Roblox saw its stock hit a 52-week low last week. Is now the time to buy?
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Roblox (NYSE:RBLX) shares hit a 52-week low last week despite the video game platformâs massive popularity with younger gamers. The metaverse play has been dragged down by the risk-off approach most investors have taken so far in 2022.
Is now the time to buy?
Post-Pandemic Struggles
While Roblox remains wildly popular with children and younger teens, the online gaming company has been grappling with a post-pandemic slowdown in growth, difficult year-over-year comps and pressure to expand its audience into an older demographic.
Given these headwinds, shares of Roblox have tumbled 25% over the past 30 days. This decline has outpaced most of its peers, both in the metaverse sector and among video game competitors.
In comparison, fellow metaverse play Meta Platforms (FB) has slid just 4% during the same time period. Meanwhile, the S&P 500 has shed 7% as of May 17.
Roblox shares have also performed worse than many of its gaming peers. Shares of Nintendo (OTCPK:NTDOY) have dropped 12% over the past 30 days, while shares of Take-Two Interactive (TTWO) have slid 11%. Zynga (ZNGA), which is slated to merge with Take-Two, has slipped 5%.
Electronic Arts (EA) shares, meanwhile, have gained 5% while takeover rumors have helped push shares of Ubisoft (OTCPK:UBSFY) 19% higher. 
Robloxâs stock reached a 52-week low of $21.65 on May 10, right before the release of its quarterly earnings report. That level represented an 85% drop from its high of $141.60, which it hit on Nov. 22.
Is RBLX a Buy?
According to a recent note by Wedbush, Robloxâs platform had around 50M daily active users in 180 countries. The Roblox community also included approximately 8M developers as of March 2021.
But Wedbush also noted that Roblox charges developers comparatively high fees to use its platform, which it believes discourages established gaming studios from participating and could eventually hinder growth.
âUnless and until Roblox considers lowering its own revenue shares for established audiences, we think that the platform will be limited in its appeal to large existing games and will be challenged in its efforts to expand its audience demographics,â Wedbush analysts wrote in note dated May 9.
Roblox reported earnings after hours on May 10. Bookings, which reflect purchases of the platformâs Robux currency, fell more than expected, declining 3% from last yearâs quarter. The companyâs earnings report also missed estimates on both the top and bottom lines.
Despite the misses, Roblox stock rose the next day as some analysts noted the company had also reported a significant uptick in user growth and engagement.
âWeâre now approaching the moment of improving comps,â wrote KeyBanc Capital Markets analysts in a note dated May 11. âWe should be close to a point where further negative revisions are unlikely and trends begin to improve.â
Morgan Stanley analysts were more cautious in their May 11 note, commenting that while growth rates appeared to be improving, âthe order of the magnitude of this acceleration will remain the first key debate.â
The analysts added that they were looking for âevidenceâ that some of the companyâs new product offerings, such as avatar marketplaces and layered clothing, were âdriving both sustained and faster engagement as well as monetization growth.â
Wall Street analysts, on average, rate Roblox a Buy. Of the analysts tracked by SA, ten rated the stock a Strong Buy, three a Buy, six a Hold and one a Strong Sell. SA authors, meanwhile, had an average rating of hold as of May 17.
SAâs Quant Ratings, however, view the stock as a Strong Sell as of Tuesday evening. While Roblox earned a C+ for growth, it also received a D for profitability, D- for momentum, D+ for revisions and F for valuation.
For a more in-depth look at Roblox, check out SA contributor David Alton Clarkâs âCrazy Like a Fox, I Bought Roblox,â On The Pulseâs âRoblox: Sell and Forgetâ or Stone Fox Capitalâs âRoblox: Donât Chase.â