Since Roblox’s Initial Public Offering back in March, shares are up almost 10%, but should investors buy the gaming company stock?
Roblox (NYSE: RBLX), whose online gaming software has become hugely popular with children and teenagers during the pandemic, made its market debut back in March. It was one of the most highly anticipated IPOs in recent years. Before buying shares, let’s take a peek into the company’s books.
What is Roblox?
Roblox is an online gaming platform and game creation system that allows players to program games and play titles created by other users. The online gaming hub allows users to create an avatar that they can play different titles with, for free. The company makes money by selling its digital currency, ‘Robux’, that can be used to buy virtual goods and enhance characters. Roblox also allows users to rent servers to host virtual gatherings, which have been particularly popular during the lockdowns.
What is Roblox’s stock symbol?
Roblox trades on the New York Stock Exchange under the ticker ‘RBLX’.
How much does Roblox stock cost per share?
Roblox went public at $64.50 per share with a $41 billion valuation. On its first day of trading, Roblox stock jumped 54%, closing at $69.50. Since then, the stock has increased more than 8% and currently, Roblox stock costs $76.44. The stock has been a little volatile, ranging from $60 to $83 in a relatively short amount of time, but if we take a step back we can see that the share is consistently rising in the short period of time since its debut.
In the first quarter of 2021, Roblox reported 42.1 million daily active users, up 79% from last year, and 9.7 billion hours, up 98% from March 2021. During the pandemic, the company overtook the hugely popular computer game, Minecraft, in active monthly users in 2020.
There’s something unique (and a little confusing) about the way video game companies like Roblox report financials. A key number for Roblox is net bookings which is how much money, real money, was converted into Robux. During the first quarter of 2021, Roblox recorded $652.3 million in bookings, up 161% year-over-year (YoY). However, money on its platform can’t be viewed as revenue until it’s actually spent. So, their revenue number was actually around $387 million in Q1.
In the company’s most recent earnings report, Roblox gave an early peek into April’s financial results on the call. The gaming platform said that revenue for the month was around $145 million, up roughly 138% year-over-year (YoY). In addition, DAUs jumped 37% to 43.3 million from April last year while bookings of $245 million were up around 60%.
Roblox’s Growth Potential
Roblox first launched in 2006, but the gaming company has never seen growth like it experienced since the pandemic began. Lockdown restrictions have forced children to spend an unprecedented amount of time indoors this year which has lifted the gaming sector as a whole.
Roblox has been hailed as the ‘YouTube of the gaming world’ due to its unique platform. The company’s pull of enticing gamers to the platform to not just play games, but to create their own has given children a new innovative way of spending their time.
This innovation is a great business model as while other developers spend millions creating a new game, it costs Roblox nothing to bring a new game on board. Some experts have said that Roblox still lacks polish in a number of areas — including its developer tools — but these are considered “low-hanging fruit” for the company and easily solvable.
However, Roblox has also drawn concern from parents over the potentially addictive nature and offensive content on the platform. Roblox even listed the challenge to “provide a safe online environment for children” as a risk factor in its IPO prospectus.
There is a lot to look forward to with Roblox. Investors just need to decide if they believe the post-pandemic future looks promising for Roblox. If we look at data coming out of Asian markets that have left lockdowns, and then returned straight back into them, the pandemic boost in demand is unlikely to disappear overnight. The company is expected to perform well as even more pre-teens begin to explore the world of gaming development.
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