ROBLOX shares plunged nearly 30 percent on Friday, set for their worst one-day decline on record, after the gaming platform forecast a sharp drop in bookings, stocking concerns that recommendation algorithm changes could further pressure near-term spending.
If losses hold, Roblox is on track to erase more than $10 billion from its market value, which stood at about $34.9 billion before the sell-off.
Roblox said on Thursday it revamped its recommendation algorithm to prioritize games with stronger long-term retention over “cash-grabby” titles focused on short-term spending, hurting bookings as users shifted toward less-monetized experiences.
The changes led second-quarter bookings to the low end of Roblox’s forecast range at $1.56 billion, with executives cautioning that monetization weakness could persist in the current quarter.
“Comparisons get tougher through August and September just as monetization is more challenged, particularly for U13 users, where we suspect parents are simply less willing to hand over highly discretionary dollars right now,” analysts at Wedbush said, after downgrading the stock to neutral.
Roblox forecast its first quarterly bookings decline in four years, expecting a 14-percent to 18-percent year-over-year drop in the third quarter, compared with LSEG-compiled estimates for roughly an 8-percent decline.
Earlier this year, Roblox unveiled age-based accounts and age-verification features that tailor platform access and communication settings to a user’s age, helping curb interactions between younger children and older users.
With these changes pressuring near-term growth, management declined to provide an updated full-year outlook for bookings, which is generated from in-game purchases of virtual currency “Robux.”
Investors are also bracing for a more competitive gaming market later this year, with the launch of Take-Two’s “Grand Theft Auto VI” expected to intensify the battle for player engagement and discretionary spending.