Why Roblox Stock Got Rocked on Thursday

Shares of Roblox (NYSE: RBLX) , the popular online gaming platform , slid 6% through 12:45 p.m. ET Thursday after the company beat on earnings this morning (kind of), but also missed on sales (narrowly).

Roblox didn't actually "earn" anything, you see, but analysts thought it would lose $0.39 per share on sales of $898.5 million in the second quarter. In fact, Roblox lost only $0.32 per share -- and so beat earnings. Sales, however, came in short at $893.5 million.

Roblox's Q2 earnings

Q2 revenue still grew 31% year over year. Additionally, the $0.32 in losses was an improvement from the $0.46 per share Roblox lost in Q2 2023.

Granted, part of the reason the per-share loss slimmed is that Roblox issued a lot of shares. Total share count grew by 30 million, or 5%. But net losses also shrank 27%, to $205.9 million. Best of all, Roblox's operating cash flow more than quintupled year over year, even as capital spending was cut by more than half.

Result: Free cash flow flipped from negative $82.5 million to positive $111.7 million.

Is Roblox stock a sell?

So Roblox is running better. But if that's so, then why are investors selling Roblox stock today? The answer: Investors may not believe the good times will keep on rolling.

And why not? Well, for one thing, "bookings" (which in Roblox's case means sales of the Robux virtual currency, which only gets recorded as revenue when players spend it in-game), grew only 22% in Q2 -- so slower than revenue growth. This implies that future sales growth at the gaming company could be slower than in Q2.

Still, with daily active users, monthly unique payers, and total hours of engagement online all rising 20%-plus, things are looking up for Roblox. Management forecasts about $520 million in free cash flow this year, which works out to about a 48 price-to-free-cash-flow ratio on the stock.

That's too expensive to convince me to buy more -- but not expensive enough to make me hit the sell button just yet.

Rich Smith has positions in Roblox. The Motley Fool has positions in and recommends Roblox. The Motley Fool has a disclosure policy .