TLDR
- Roblox has been formally labeled a “very large online platform” under the EU’s Digital Services Act, giving it clearer compliance rules for its 45 million European monthly users.
- The stock got a lift from a technical bounce and heavy short covering following a sharp drop in bearish bets during August.
- Roblox’s $3 billion share buyback plan is adding further support to the stock.
- Q2 earnings came in at a loss of $0.26 per share, beating estimates, but revenue of $1.47 billion missed the $1.60 billion consensus.
- Analyst consensus is “Hold” with an average price target of $60.89; Morgan Stanley recently cut its target from $62 to $55.
Roblox (RBLX) opened at $41.32 on Tuesday, bouncing from recent lows after the EU formally classified the platform as a “very large online platform” under the Digital Services Act. The ruling gives Roblox a clear compliance timeline for its 45 million monthly users in Europe, which investors appear to have welcomed.
The stock has had a rough year. It is down over 52% year-to-date, with a 12-month high of $142.00 and a recent low of $33.88. The current market cap sits at around $27.52 billion.
The bounce was not just about the EU news. Technical factors played a role too. Short sellers pulled back sharply after August’s heavy bearish positioning, and that short covering added fuel to the move upward.
The company’s $3 billion share repurchase plan, approved in May, covers up to 9.5% of outstanding stock. The board’s decision to buy back stock at these levels signals confidence that the stock is undervalued.
Earnings Miss Revenue Target
In its most recent quarterly report released July 30th, Roblox posted a loss of $0.26 per share for Q2, beating the consensus estimate of a $0.34 loss. However, revenue of $1.47 billion fell short of the $1.60 billion analysts had expected.
Revenue was still up 8.3% year-over-year. In the same quarter last year, the company posted a loss of $0.41 per share, so earnings have improved. Analysts currently project a full-year loss of $1.39 per share.
The company carries a debt-to-equity ratio of 7.82 and a negative net margin of 17.60%. Its 50-day moving average stands at $45.92, and the 200-day average is at $51.39, both above the current price.
Institutional Activity and Analyst Views
Public Employees Retirement System of Ohio bought 181,051 RBLX shares in Q2, valued at roughly $9.85 million. Institutional investors and hedge funds collectively own 94.46% of the company.
Other new buyers in Q2 included Kinetic Partners Management LP, which added a stake worth approximately $6.57 million, and S&CO Inc., which picked up a position worth around $921,000.
Analyst opinion is split. Morgan Stanley lowered its price target from $62 to $55 but kept an “overweight” rating. DA Davidson set a $40 target. Arete Research has a $95 target with a “buy” rating. Piper Sandler rates it “neutral” with a $47 target.
Out of 31 analysts tracked, 12 have a buy rating, 15 hold, and 3 sell. The consensus price target is $60.89.
Insider activity is worth watching. CFO Naveen Chopra sold 17,509 RBLX at $37.96 on August 20th, valued at approximately $664,641. Insider Matthew Kaufman also sold 14,904 RBLX at the same price. Both sales were made to cover tax obligations tied to equity award vesting.
Total insider selling over the past 90 days amounts to 168,213 RBLX worth approximately $6.83 million.
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