The great pandemic tide, to paraphrase Buffett, lifted many boats. We call these ‘covid-stocks’ – a distinct group of companies that benefitted disproportionally from the health crisis. Included among these stocks are Roblox, the global online gaming company, Zoom, Peloton, BioNtech, and Amazon etc.
Founded in 2006 by David Baszucki and Erik Cassel, Roblox’s fortune soared when everyone was quarantined at home with nothing better to do. In early February 2020, the firm was valued at just over $4 billion.
A mere 12 months later, the California-headquartered gaming firm soared to a market capitalisation of $38 billion when it listed on the NYSE via an IPO. Later that year, Roblox’s share price peaked at around $140 ($77 billion market cap).
How has Roblox performed since its IPO?
Unfortunately, not very well. Since Roblox listed on the NYSE at $64.50 per share, the Roblox share price is now down over 40%
Roblox’s bull run in the public arena was a brief one. The withdrawal of covid-stimulus in late 2021 created many loss-making tech stocks. Roblox was hit particularly hard. From its peak, the company plunged 84% in six months. Now, RBLX trades around at $40 which values the company at just $24 billion. The chart below sketches the Roblox share price’s roller-coaster ride during 2021/22.
Investors are rightly particularly concerned that with the full reopening of the economy, its young users will be less inclined to stay in the Roblox gaming ecosystem. Indeed, in the second quarter (Aug’22) Roblox reported a fall in bookings yoy – despite a rise in quarterly revenue by 30%. Free cash flow was also negative.
Is Roblox (NYSE:RBLX) a good investment in the long term?
However, let us step back and look at the big picture. Will Roblox survive in the long term? In my opinion, most likely yes. At this point, there is nothing to suggest that the gaming company’s survival is threatened. It remains highly popular with users, revenue is significant and engagement with all parties (esp developers) is strong. Watch the Roblox CEO presentation in September (video) you will understand its story. Below you can see Roblox’s growing revenue trend. Moreover, many see Roblox as an entry stock into Metaverse – a digital interactive platform.
Source: Roblox inc
The problem with Roblox these days is profit, specifically, a lack of it. Perhaps we may see a significant equity dilution should financial losses continue into 2023. The third quarter results this week will shed some answers on this question. If RBLX’s losses widen significantly, it may knock a few dollars off its share price.
Still, by most metrics, there is a valuable gaming ecosystem in Roblox and if you manage to buy it cheap, there are some potential returns to be made.
In the stock market, the best time to buy shares is during a bear market. This is because most companies are reporting poor results and the market is expecting a dire outlook. This leads to a low valuation.
Last year, investors did not have enough of Roblox’s shares. Valuation stayed high; sentiment was uber bullish. Investors who bought RBLX then are now seeing their long positions deep underwater.
There is a lesson in this – avoid buying speculative stocks when the market is extremely bullish. With Roblox’s share price now 70 percent below its all-term high, investors who take a long-term view may start easing into the stock.
Technically, a retracement to its 52-week lows at $22-25 may open up some buying opportunities. Will Roblox shares hit single digits? Difficult to say now. It all depends on the macro setup and future company guidance.
After a hefty fall, Roblox share is neither overvalued nor undervalued now. This is because the market sentiment is extremely jittery. Recall Meta’s shocking decline after its ill-received earnings results? Well, every quarterly result announcement now may lead to extraordinary price moves. Investors are no longer certain what to expect from companies.
If RBLX reports slightly negative results, its share prices may plunge 10-20% overnight. On the other hand, should results exceed expectations by a small margin, RBLX’s share price could surge by 10-20%.
In view of this heightened volatility, traders may wish to position size correctly.
Roblox has been trading is a range since early summer, amidst a gently rising channel. The stock did rebound sharply in July as prices rallied 100 percent from $25. This is due to a ‘technical rebound’ from oversold conditions and a more bullish macro backdrop.
After that, Roblox spent the last six weeks regressing from this advance due to profit-taking and deteriorating macro conditions. To confirm a ‘base breakout’ – a bullish chart formation – require prices to break above the psychological level at $50.
During the autumn consolidation, however, Roblox’s volatility remained high. It sometimes rebounded steeply, eg +17% jump on October 17, or dropped sharply (-7%, November 4). Caught on the wrong side of Roblox’s hefty move would cost traders dearly.
In 2021, when the overall market was very bullish, most analysts slapped ‘Buy’ or ‘Outperform’ recommendations on Roblox. Just 1 analyst had a ‘Hold’ recommendation in 2021. But things have turned around quite decisively.
Right now, there are 9 brokers with a ‘Hold’ recommendation on Roblox, and another 5 analysts had a ‘Underperform’ rating. As you can see from the Roblox broker forecasts, Wall Street is no longer that enthusiastic about the gaming company these days.
Source: Financial Times
To buy shares in Roblox (NYSE:RBLX), you need a trading or share dealing account. Follow these three steps if you want to buy shares in Roblox:
- Decide if you want to buy Roblox shares in the short-term or invest in the long-term
- Compare share dealing and trading fees in our comparison tables
- Choose which broker is right for you and open an account
Buying one NYSE:RBLX share costs $40.79. However, as well as the $40.79 cost of buying each share you will also have to pay any relevant tax, commission when you buy and sell shares, custody fees for holding your shares on your account and foreign exchange fees for converting GBP into USD. You also have to consider the difference between the bid price (the price at which you sell shares) and the offer price (the price at which you buy shares). These fees vary depending on what sort of account you open, and with what broker. You can compare the different costs associated with the different types of trading and investing accounts in our comparison tables below.
It’s also important to remember that share prices can move quickly, for example, the current NYSE:RBLX share price is $40.79 which is a change of 0.45 or 1.12% from the last closing price of 40.79 with 6,519,687 shares traded giving NYSE:RBLX a market capitalisation of $24,909,674,470. The most recent daily high has been 41.14 and daily low 39.5. The NYSE:RBLX share price 52 week high has been 53.88 and the 52 week low 23.88. Based on the most recent NYSE:RBLX share price opening of 40.79, the current NYSE:RBLX EPS (earnings per share) are -1.72 and the PE (price earnings ratio) is n/a.
Pricing data automatically updates every 15 minutes
The answers to our frequently asked questions by people interested in buying Roblox shares about Roblox’s share price are automatically updated every 15 minutes.
The current Roblox share price is $40.79
Roblox’s share price has moved $0.45 or 1.12% today.
Yesterday, Roblox’s share price closed at $40.79
There were 6,519,687 shares traded in Roblox yesterday.
What is Roblox’s market capitalisation (market cap)?
Roblox has market cap of $24,909,674,470
Roblox’s most recent daily high has been $41.14
Roblox’s most recent daily low has been $39.5
The Roblox share price 52 week high has been $53.88
The Roblox share price 52 week high has been $23.88
Roblox’s current earnings per share (EPS) is -1.72
What is Roblox’s price-earnings ratio (PE)?
Roblox’s current price earnings ratio (PE) is n/a