In 2021, Roblox (11.66%) had been amongst the top new growth stocks with a reference price of $45 for each share. Roblox had gone public last March through direct listing. Starting its trade at $64.50, it reached the all-time high and in November had hit $134.72.
Initially, Roblox had attracted great attention because of its tween players’ popularity and creators. The pandemic led to a greater number of students staying home and spending more time playing Roblox efficiently.
Today, the stock trades of Roblox have declined to $40 which has raised concern about its low growth in this post-lockdown period, the rising leverage, its increasing losses, and continuing stock dilution.
Considering the risk of owning Roblox after weighing the pros and cons in the challenging market, we will dig deeper in discussing the three facts about its company and its long-term growth impacts which most people are unaware of.
1. It Focuses on Getting Older Users
Roblox is known to have most of its audiences from children aged below 13 years. To maintain the platform’s safety for children, Roblox must censor the content, protect from dangers of people, and handle the data carefully.
Tween users may leave Roblox as they grow older, as is said by Roblox that young users may just be less brand loyal. As more complex games develop, these people shift to professional gaming engines such as Epic Games, Unity Software.
To cater to this concern, Roblox is planning to reduce, gradually, the dependence on tween users. Mike Guthrie has said in the latest conference call that the growth of Roblox in the U.S will be marked by old users.
2. Growing Overseas Growth Dependence
Another pillar of the platform’s growth is overseas expansion. Europe, Asia-Pacific, and ROW regions have gained DAUs much faster than its core Canada and U.S businesses. Russia, Brazil, Japan, and India have been Roblox’s overseas markets growing the fastest.
But the lower revenue from Canadian and American users and the Geopolitical conflicts make the growth a double-edged sword. Hence, investors need to be careful.
3. Long-Term Growth Depends on the Metaverse
Finally, the long-term growth of Roblox depends on its Metaverse ecosystem expansion with the partnership brands. With these partnerships, Roblox is becoming an ever-developing and growing platform for gaming such as Epic Games Fortnite.
Roblox should still prove itself
While Roblox looks like a good stock to invest in considering its value, it still needs to prove a lot. While its long-term ambitions are appreciated, it does need to get stable growth and improve its balance sheet before one considers investing in it.
Investing $1000 in Roblox; Worth It?
Before investing, you should know that Roblox isn’t amongst the top 10 best stocks to buy for investors.