Roblox went IPO on March 10th for $64.50 per share and has been off to a solid start. In this article we will discuss if this gaming company is a good investment. Also, I’m not a financial advisor!
What is Roblox?
For those of you who don’t know what Roblox is, this is coming from their website. Roblox is a global platform where millions of people gather together every day to imagine, create, and share experiences with each other in immersive, user-generated 3D worlds. The types of gameplay on Roblox are just as limitless as the imagination of the creators themselves. On Roblox you can play games and even create games and get paid for it.
According to the latest earnings call, Roblox earned $387 million in revenue and $924 in the past year. 31% of their revenue went to the game developers($118 million). They plan on paying developers up to $400 million in the future. They reported $624 million in booking(up 161% y/y). Bookings are when a customer commits to spending money(i.e gift cards). Roblox is not yet a profitable company as they reported a $137 million net loss. They have more liabilities($2 billion) than assets($1.8 billion). Daily active users(DAU) were at 42 million, up from 37 million last quarter. The majority of the Roblox gamers are age 13 and below. The good sign is DAU’s for 13 and up has increased to 20 million, up from just 9.7 million last year. That’s a big deal.
Roblox is mainly played on computers, tablets and the XBOX. When asked about other devices they said they plan to be on the Nintendo Switch and Playstation, but didn’t give a timeframe as they’re focusing on smartphones currently. They also talked about implementing voice chat, education and interactive concerts featuring well-known artists. But would not disclose any details.
Roblox’s source of revenue comes mostly from bookings, subscriptions and in game purchases; such as clothing for your character, accessories and toys. They haven’t made a big splash in advertising and mentioned in their conference call that venture is down the road. Although, they do have billboard style ads in their games.
The Bullish Case
Roblox will continue to grow revenue in the future. Seeing a huge increase in older crowds is a big deal. Adding interactive education such as geography, dissecting frogs etc could be another big attraction. If they could land some big musicians to perform in their game like Fortnite has done or somehow showcase big-named Roblox youtubers in their games gamers would flock to that big time.
The Bearish Case
A lack of profit and more liabilities than assets is a bad double whammy for the company. And of all the earnings calls I’ve listened to this is one of the most vague and hush hush ones I’ve encountered. I don’t like how they didn’t give much detail on any near or far future plans for the company. No game plan on reducing debt or a path to profitability.
I do have a small position in this company for my daughter so she can say she owns a piece of Roblox. But I do not plan on buying more until they give a better future outlook or if the stock price goes down considerably.