When we all had to quarantine and lockdown, concerts, like everything else, went digital. For our kids, all they had to do was log onto their games and find their favourite musicians performing in the game world. Roblox was one of those games.
This was completely natural to them. They spend so much of their time, creative energy, and your cash in these immersive gaming worlds.
There’s a term for this kind of world, where digital reality mirrors and expands on physical reality…
Sure Facebook, or Meta as it’s now known, and Microsoft are investing billions into new metaverse technologies. But the metaverse was around long before these market movers took up the name.
Half the kids in America apparently are already participating in the metaverse. All through one game, Roblox.
But Roblox isn’t just a game, it’s a whole game developer platform with its own currency and ecosystem. And they went public in March 2021.
Let’s take a look at Roblox Corp. as a company to see what its financials look like.
What is Roblox Corporation?
Roblox Corporation started out as a game developer in 2004. Now they’re a massive platform for over 9 million other developers.
In March 2021, Roblox listed on the NYSE under the ticker RBLX, opening at $64.50 per share. The share price went as high as $141.60 (Nov. 22, 2021) and fell back down significantly to $48.40 as of March 28th, 2022.
The platform is a base on which users can make their own games using the Roblox Studio platform.
Chart of Roblox since they’ve been listed
How does Roblox make money?
Roblox operates under a freemium business model.
They draw in users with millions of cool games and a digital world where their characters can do almost anything they want. They make money in 4 ways:
- Users can buy “Robux,” the in-game currency, then buy avatars and other customization features, like pets.
- Roblox also sells advertising in their digital world. They host very targeted campaigns with companies like Disney, Warner Bros., and Lego.
- As Roblox games gain popularity, companies that sell toys take advantage of this and pay Roblox to create and sell merchandise, such as their action figures. Roblux won’t disclose how much revenue they make from licensing merchandise though.
- Finally, Roblox collects royalties from developers who develop games in the Roblox Studio. Developers keep all the intellectual property rights to their games and split any in-game income with Roblox.
What is Roblox: Financial Metrics
|Total Revenue (2021)||Net Loss (2021)||Gross Profit|
|1.92B(growing every year since 2018)||-491.65M(Operating Expenses are 922.59M contributing to negative net income despite good gross profit)||427.49M(up almost 370% since 2020!!)|
|Price to Sales (Current)||Price to Book Ratio (Current)||Market capitalization|
|15.54(Compared to 31.49 for 2021)||51.01(Compared to 103.35 for 2021)||29.605B|
|Equity (2021)||Debt (2021)||Cash in the Bank (2021)|
|592.92M(Up 355.15% y-o-y)||1.23B(Up 356.69% y-o-y)||3.00B(Up 335.59% y-o-y)|
Recent Roblox News
On March 15th, Roblox said their daily active users increased 28% year-over-year in February (55.1Million users) alongside their hours engaged rising to 3.8 billion.
But they’ve had 2% – 4% less bookings year-over-years. “Booksings” refer to purchases of the in-game currency, Robux.
If you think of it, this time last year, many students were in some form of lockdown, making it easier to play games and avoid school work. Yet, “engagement” is up year-over-year. So time will tell if users will continue to spend money on the Roblox platform.
What do I do with this information
Let this analysis fuel your own research.
When you look at the fundamentals, Roblox isn’t making a profit, even though its revenue is growing annually. Is this a company you’d be comfortable owning?
If you are bullish on the metaverse, Roblox could be a way to buy in early. But they’re first to this space, doesn’t mean they’ll last the longest.
So make sure to do your own due diligence before investing in anything, especially Roblox.
And if you interested in learning about how to profit from stocks like this, start with our Options for Beginners series.
That’s all for now.
Your fellow Stock Hackers,
🍒Cherry & Erwin
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