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Read more about Roblox’s risk and uncertainty. This additional scrutiny could force the firm to invest further in both algorithmic and human moderation, limiting its margin expansion. The young user base could also bring increasing regulatory inquiries, as parents and authorities have historically been very concerned and vocal about games with very young users, particularly ones that allow chat, user-created content, and randomized in-game purchases. A key factor for the firm’s long-term growth will be keeping younger users as they age into and out of their teen years, as over two-thirds of users are under the age of 17 and around 40% are under 13. While its platform is a unique offering, the firm still competes with traditional game publishers to both attract new users and hold on to their current players as they grow older. Roblox operates in a highly competitive marketplace against firms with more financial and development resources. We think seeing some sign of that happening in the quarter is also a positive. and Canada, this gap should continue to close as the European user base matures. With more active users and relatively higher incomes in Europe than in the U.S. Even with that growth, Europe trails the United States and Canada by a wide margin in terms of monetization-about $8 of quarterly bookings per active user versus $33. Europe looked especially strong, with 37% bookings growth year over year. In addition, usage metrics and monetization on the Roblox platform were solid during the quarter. Free cash flow should expand nicely from here. Specifically, the firm guided to lower capital spending in 20 versus 2023, which is poised to be lower than 2022. Management signaled that these two line items, which have been a major focus of investment, will remain in check for the foreseeable future. Infrastructure, trust, and safety costs have leveled off after a period of rapid growth, and capital spending is moving lower. We think Roblox is making good progress on profitability after a period of heavy investment and likely bloated spending resulting from the surge in demand during the COVID-19 pandemic. Morningstar Uncertainty Rating: Very High.Morningstar Economic Moat Rating: Narrow.
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Here’s Morningstar’s take on Roblox’s earnings and stock. Roblox RBLX released its third-quarter earnings report on Nov.