Roblox Stock Crashes: Here’s Why Investors Are Panicking

Roblox shares took a nosedive today—here's what sent traders scrambling for the exits.

Metaverse momentum stalls

The platform's much-hyped virtual economy showed cracks as user growth missed whisper numbers. When your digital land barons start selling, you know there's trouble.

Revenue reality check

Bookings growth slowed faster than a laggy server, with Robux purchases failing to offset infrastructure costs. Turns out building infinity pools in the metaverse doesn't print real money.

Wall Street wakes up

Analysts finally noticed the emperor's new digital clothes, slashing price targets with the enthusiasm of day traders discovering leverage. Another 'story stock' learns fundamentals matter—even in fantasy worlds.

Image source: Roblox.

Louisiana takes a shot at Roblox

And why? Louisiana Attorney General (AG) Liz Murrill announced today that her state is suing Roblox for:

• "Facilitat[ing] the distribution of child sexual abuse material and the sexual exploitation of Louisiana's children."
• Failing to implement "basic safety controls to protect child users from predators."
• And also failing to warn its users, and their parents, of these dangers.

"Roblox is overrun with harmful content and child predators," argues the Louisiana AG, and "prioritizes user growth, revenue, and profits over child safety."

Of particular concern, the AG alleges "a group of 3,334 [Roblox users] openly traded child pornography and solicited sexual acts from minors."

Is Roblox stock a sell?

This is terrible PR for Roblox. More substantially, Louisiana is seeking monetary damages, unspecified "injunctive relief" (which might simply mean stronger safety protocols, but could potentially forbid the company from doing business in the state), and proof that "adequate safety features" have been put in place -- all of which threaten Roblox's ability to achieve "user growth, revenue, and profits."

Speaking of profits, it's worth pointing out that Roblox doesn't actually have any. The gaming company has lost money every year it's been in business, and most analysts agree Roblox will continue losing money at least through 2029. The company is free-cash-flow positive, however, generating $942 million of free cash FLOW over the last 12 months.

That still works out to a price-to-free-cash-flow ratio of 92.