Why Roblox Stock Plunged 36% in January

Shares of Roblox (NYSE: RBLX) plunged 36.2% in January, according to data provided by S&P Global Market Intelligence. The S&P 500 also had a bad month, falling 5%. However, Roblox stock has been in a free fall ever since the Federal Reserve announced changes to its fiscal policy in November 2021. As a result, analysts lowered expectations in January. And Roblox stock has continued falling in February due to a short-report with some disturbing allegations relating to the safety of children, which Roblox's management strongly disputes.

Over a single year (a short time horizon), a stock's valuation was the primary driver of stock performance, according to a study of stocks from 1990 to 2009 by Boston Consulting Group. In other words, if a stock does well over a short period of time, it's likely because its valuation simply got more expensive and vice versa.

That's certainly been true of high-growth stocks since the start of the pandemic -- valuations have generally soared. However, in November the Federal Reserve said it was tapering asset purchases. And in December it said it was likely raising interest rates in 2022. Both announcements whacked pricy stocks like Roblox.

Source Fool.com