Roblox: Tough Road Ahead

seekingalpha2022-04-13

SummaryRoblox is a metaverse category leader with a unique two-way platform.January and February 2022 results appear bifurcated as bookings were down while users and hours engaged were up.Investors in...

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Bull1973
2022-04-13
Bull1973
Ok
Bull1973
2022-04-13
Bull1973
Ok
Dwi
2022-04-13
Dwi
We shud supportcrypto metverse instead 😅

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For starters, Lebron James is now on Nikeland and in 2021 a virtual Guccihandbag was sold for more than the actual handbag at >$4,000 on the platform. While Roblox is likely to remain a metaverse category leader in the near future, I believe investors in the stock will face a difficult period as markets are no longer rewarding unprofitable growth stories facing Covid comps.The biggest counter-argument to my thesis is that the stock has fallen a lot and much of the negativity has been priced in. Should Roblox continue to post strong numbers throughout 2022, coupled with moderating levels of inflations and lower 10-year yields, investors who stick with the stock through thick and thin should be handsomely rewarded. However, it's difficult to see the company posting growth numbers similar to those during the pandemic when kids were forced to stay at home.While Roblox delivered strong numbers throughout 2021 in terms of users and engagement, Jan and Feb 2022 results appear to be bifurcated in the sense that users are up but booking are down. In February, users grew 28% YoY to 55.1 million and hours engaged also increased 21% to 3.8 billion, however bookings saw the first YoY decline of 3% (vs. +3% increase in Jan), while average bookings per DAU saw a 25% YoY decline (vs. -23% in Jan).Company dataCompany dataThese results show that Roblox is going up against very difficult Covid comps. As the world returns to normal, kids are back in classrooms and will likely spend their summer playing football. Consequently, playing time on Roblox will likely be reserved for the weekends, leading to lower hours of engagement and purchases on the platform. This is true for the US and UK which make up the majority of spending on Roblox.Granted, Roblox is a very innovative platform. The company has made a number of acquisitions such as Loom.ai (3D avatar facial animation) and Guilded (VoIP and instant messaging) and has recently released a new feature called Layered Clothing that lets players create 3D clothes and accessories for any avatar characters. The product pipeline remains robust, but it's unclear whether spending on the platform will re-accelerate as I expect users to spend less time engaging with the service.From a valuation standpoint, bulls may argue that the stock has seen a meaningful reset to 8.5x forward P/S from >24x, therefore Roblox is reasonably priced for slower growth (+5.4% consensus revenue growth in 2022) and modest expectations. 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As FY22 top line growth is set to slow down materially, I believe it's best for investors to remain on the sidelines.Data by YCharts","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":9080957240,"gmtCreate":1649837255687,"gmtModify":1676534587008,"author":{"id":"3584680402793671","authorId":"3584680402793671","name":"Bull1973","avatar":"https://static.tigerbbs.com/866d29bf88ff7363d121a5ccc6028aae","vip":1,"crmLevel":2,"crmLevelSwitch":0},"htmlText":"Ok","listText":"Ok","text":"Ok","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9080957240","repostId":1121335110,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9080957677,"gmtCreate":1649837248090,"gmtModify":1676534587001,"author":{"id":"3584680402793671","authorId":"3584680402793671","name":"Bull1973","avatar":"https://static.tigerbbs.com/866d29bf88ff7363d121a5ccc6028aae","vip":1,"crmLevel":2,"crmLevelSwitch":0},"htmlText":"Ok","listText":"Ok","text":"Ok","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9080957677","repostId":1121335110,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":9080074884,"gmtCreate":1649825333830,"gmtModify":1676534584968,"author":{"id":"3575075387288407","authorId":"3575075387288407","name":"Dwi","avatar":"https://static.tigerbbs.com/b470e8471ae7efb2a2fa1a0f9302ff60","vip":1,"crmLevel":4,"crmLevelSwitch":0},"htmlText":"We shud supportcrypto metverse instead 😅","listText":"We shud supportcrypto metverse instead 😅","text":"We shud supportcrypto metverse instead 😅","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/9080074884","repostId":1121335110,"repostType":4,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"isCommentEnd":false,"newsSizeData":{"likeSize":106,"commentSize":5,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.24.2","shortVersion":"4.24.2","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/1121335110"}