Stock Roblox: Top Metaverse Play is Well Oversold

Roblox Co-Experience Platform Developer (RBLX) is arguably one of the best metaverse games in the public markets today. His stock crashed, giving up all 2021 gains and then some. From peak to trough, stocks have lost more than 80% of their value. More recently, the intriguing gaming stock has started to gain momentum, now up nearly 100% from its June low.

While daily active user (DAU) growth remains robust, with engagement also on track, Roblox’s EBITDA margins are not on track. The company is investing heavily in its future at the expense of the attractiveness of short-term margins. I think this is the right move, as the competition in the “co-experience” world may increase once the metaverse is ready for prime time.

Roblox is a remarkable success that has created quite an impressive flywheel for itself. To increase the speed of its flywheel, it must invest in its developers and the capabilities of its platform. The metaverse can be several years. However, when it’s ready for the masses, Roblox could face a wave of hungry rivals looking to replicate its success.

Indeed, many may be inclined to think of Roblox as just a video game developer. It’s so much more. I consider the company a pioneer. This seems like a preview of what people should expect from the Metaverse (or whatever we call it) of the near future.

With an updated valuation and a market likely to see substantial growth over the next 10-15 years, I’m incredibly bullish on the stock.

Roblox is still in growth mode

Roblox can still grow its number of users, but the growth rate has slowed significantly in recent quarters. This slowing in momentum (and negative margin trajectory) has likely depressed investors in the stock as interest rates drag the economy into a recession or potential downturn.

Still, I think economic storm clouds are mostly to blame for Roblox’s downfall. Under the hood, Roblox continues to do a lot of things well. Once the recession comes and goes, I think the co-experience business will be hard to stop as more and more users are introduced to the digital experiences possible with virtual or augmented reality.

Going forward, I would look for Roblox to invest heavily in tools that allow its developers to create next-level experiences for its users. With a strong balance sheet and over $800 million in cash, the company may wish to pursue acquisitions to help bolster the commitment.

Last year, Roblox acquired game chat platform Guilded, which could help bolster its co-experience ecosystem. Indeed, Roblox is not just about gaming; it focuses on a much larger market with incredible room for growth.

Roblox has the moat to rival Meta

Roblox’s moat rests with its developers and users. Such a gap can be difficult for Meta (META) to break in, even though it invests heavily in metaverse software. While the metaverse as Meta Platforms sees it may be many years away, Roblox has the platform that Meta wants to replicate.

Meta Platforms acquired Crayta, a less popular game development platform than Roblox, just over a year ago. Although Crayta has a lot of potential, it might prove difficult to attract engaged Roblox users who may be stickier than many realize.

As digital experiences (concerts, games, and hangouts) become increasingly popular, Roblox may have the wherewithal to re-accelerate its growth. There will be many rivals in the race for the metaverse. However, I wouldn’t discount Roblox’s ability to innovate in the new realm.

Between Meta and Roblox, I would take Roblox every day of the week.

Roblox is more than just a game

Roblox shows that the metaverse (or omniverse) isn’t just about games. It will be a place of work and leisure. In the games category, Roblox showed that digital experiences could be a major draw for audiences who wouldn’t classify themselves as gamers.

The advent of game streaming and the rapid rise of the mobile game market has made gamers out of many of us. Yet it’s the presence factor that makes Roblox’s co-experience approach so compelling.

For younger audiences, Roblox has become the place to hang out with friends. Many analysts may dismiss Roblox as just one video game that young users will pass on when they grow up.

Roblox has also done a great job of appealing to older teens and young adults. As the platform continues to improve, it’s no exaggeration to think that Roblox can grow with its young user base.

It won’t be an easy task, but when you look at Roblox as a place to create experiences, it becomes more apparent that Roblox isn’t just another immature game that kids will abandon once something better comes along. . Roblox graphics have never been a source of strength, to begin with!

Wall Street’s view on RBLX

When it comes to Wall Street, Roblox has a Moderate Buy consensus rating based on nine buys, seven holds, and two sells assigned over the past three months. The RBLX average price target of $38.41 implies a downside potential of 22%.

Analyst price targets range from a low of $21.00 per share to a high of $57.00 per share.

Takeaway – Roblox has the most metaverse momentum

Roblox stock exploded and broke. With so much recession risk already priced in, I think the 13.5 times sales multiple is a bargain, given that Roblox seems to have the most metaverse momentum of any company aiming to dominate the digital worlds of the future. .

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