By Roblox Corp (NYSE: RBLX) says continued demand for the user-generated video games on its online platform helped it top estimates in its first financial quarter.
Plus, the company raised its guidance for annual bookings this morning, indicating users are choosing to spend on those games despite tariff uncertainty under the Trump administration in 2025.
Still, there are three big enough reasons why investors should consider trimming exposure to RBLX shares on the post-earnings rally on Thursday.
Roblox is still losing money
Roblox’s Q1 earnings and full-year bookings guidance look appealing on the surface, but they must not steal focus from a significant underlying weakness – RBLX is still losing money.
In the first quarter, the company’s net loss attributable to common stockholders was about $215 million.
The video gaming platform continues to use much of its cash flow for “developer exchange fees”.
In fact, that expense is on the rise, hitting $923 million last year – a 25% increase that roughly matched bookings growth.
This raises doubts about Roblox’s ability to break even any time soon.
Note that RBLX has soared nearly 40% in recent weeks. So, the valuation is not super attractive anymore either.
RBLX faces regulatory headwinds
Another reason to consider selling Roblox stock on the post-earnings strength is the storm of regulatory headwinds it faces in 2025.
The NYSE-listed firm is spending aggressively on improving its guardrails to ensure the safety of its younger users online.
Still, it has recently been slapped with an SEC probe.
These added costs could make it even more difficult for RBLX to turn a profit on a GAAP basis in the coming quarters.
Roblox insiders are selling stock
Finally, the video gaming platform could pose a risk to investors, as corporate insiders have been consistent net sellers of the stock over the past 12 months.
During that period, insider sales of RBLX shares have outpaced purchases by more than eight to one.
Insider selling is often viewed negatively because it can signal a lack of confidence in the company’s future prospects.
Investors often monitor insider transactions rather closely, and when executives or board members sell large amounts of stock, it may raise concerns that they anticipate declining performance or unfavourable news.
Investors should also note that Wall Street doesn’t see any meaningful upside in RBLX shares from current levels either.
While the consensus rating on Roblox stock currently sits at “overweight”, analysts have an average price target of about $69 only, which is roughly in line with the price at which the stock is trading already.
Shares of the gaming company were up around 2% to trade at around $68.40 on Thursday afternoon.
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