Is Roblox Stock A Buy Right Now?

Is Roblox Stock A Buy Right Now After First-Quarter Earnings Results?‌

 ‌$Roblox Corporation(RBLX)$‌-4.16%

San Mateo, Calif.-based Roblox (RBLX) is a popular video game platform that is considered a play on the emerging metaverse, a next-generation version of the internet. Is Roblox stock a buy in the current stock market 

weakness?

The company's first-quarter earnings results came out May 10 after the market close. Roblox lost 27 cents a share on bookings of $631.2 million in the March quarter. Analysts polled by FactSet expected it to lose 22 cents a share on bookings of $655.7 million.

Roblox reported healthy growth in users and usage of its online video game and social platform in the March quarter. But bookings fell 3% year over year and missed estimates. Plus, it said bookings were down 8% to 10% year over year in the month of April.

The company said it had 54.1 million average daily active users in the first quarter, up 28% from the same quarter last year. Hours engaged on the service totaled 11.8 billion, up 22%.

RBLX shares rallied more than 6% Wednesday, trading around 33.90. RBLX stock hit an all-time low on May 10 at 21.65.

RBLX Stock IPO

The Roblox stock initial public offering (IPO) via direct listing occurred on March 10, 2021 with a suggested price of 45 per share. With a direct listing, no new shares in the company are created and sold. Nor did the Roblox IPO raise any capital. Instead, current investors begin selling already existing shares based on demand when trading opens.

On March 10, 2021, Roblox stock closed at 69.50, more than 54% above the 45 IPO price. A huge price percentage increase on the IPO day indicates strong institutional backing.

Roblox Fundamental Story

The company's eponymous "Roblox" game is the biggest mobile game of 2020 in the U.S. in terms of revenue, according to Sensor Tower. It surpassed "Candy Crush," which had been the top game for the past three years.

Roblox reported having 32.6 million daily active users at the end of 2020, up 85% from the year-ago period. Revenue jumped 82% in the year to $924 million. It had a net loss of $253 million in 2020, vs. a $71 million loss in the prior year, according to the Roblox IPO filing.

What makes Roblox different from other online game platforms is that it lets users create their own games. Developers receive 30% of the proceeds generated from a game, such as the sale of virtual outfits and avatars.

Roblox reported its fourth quarter earnings results after the close on Feb. 15, missing Wall Street's estimates. The company lost 25 cents a share on bookings of $770.1 million in the December quarter. Analysts had expected Roblox to lose 12 cents a share on bookings of $772 million, according to FactSet. Roblox stock crashed more than 26% in response.

Roblox Stock Is A Metaverse Investing Play

What is the metaverse? The metaverse is considered a next-generation version of the internet. Technologists describe the metaverse as a persistent, shared, 3D virtual environment. There, people meet for activities ranging from playing games to conducting business. It incorporates such technologies as virtual reality and augmented reality.

Mark Zuckerberg, now the chief executive of Facebook parent Meta Platforms (‌$Meta Platforms, Inc.(FB)$‌), describes the metaverse as "an embodied internet that you're inside of rather than just looking at."

"The metaverse is bigger than gaming," said Christina Wootton, Roblox vice president of brand partnerships. "We're ushering in this new category of human co-experience. It's an immersive place where people can come and connect with one another and have shared virtual experiences. They can do things together, such as work, learn, play, shop and experience entertainment."

Metaverse Stocks To Buy And Watch

Meta Platforms, Microsoft (‌$Microsoft(MSFT)$‌) and Nvidia (‌$NVIDIA Corp(NVDA)$‌) are among the top metaverse stocks to watch in the metaverse space.

Meta Platforms is more than 40% off its 52-week high. The company has invested heavily in virtual reality and augmented reality as it builds Zuckerberg's vision of the metaverse.

Microsoft is planning metaverse apps for gaming, like possible transformations of "Halo", "Minecraft" and "Microsoft Flight Simulator" into full 3D worlds. The IBD Leaderboard stock is below its long-term 200-day line.

Nvidia is below its 50-day line, as a new base continues to take shape. Shares are about 40% off their 52-week high. On Nov. 9, Chief Executive Jensen Huang touted Nvidia Omniverse, a virtual world simulation and collaboration platform for 3D workflows.

Roblox Stock News

On Sept. 1, Roblox announced the launch of Vans World, an interactive Vans skateboarding world experience. Vans World is a metaverse playground where players can perform tricks and customize Vans gear and apparel, while hanging out with their friends.

On Nov. 18, Nike launched an immersive world experience — called Nikeland — on Roblox. Players will be able to enter a digital showroom to dress their avatar in Nike apparel and check out the company's latest products.

On Nov. 19, Roblox held a well-received analyst day event in which Roblox executives discussed the company's penetration of new markets such as education and music. The company also said it believes all consumer brands will need a Roblox strategy in the next three to five years.

Morgan Stanley analyst Brian Nowak reiterated his overweight rating on Roblox stock and raised his price target to 150 from 88.

On Feb. 9, The National Football League launched NFL Tycoon to engage the next generation of NFL football fans in the Metaverse. The NFL will be the first official major sports league to offer a persistent experience on Roblox. NFL Tycoon lets fans build, play, and learn in their own NFL-centered world through a combination of the popular tycoon and simulator genres on Roblox.

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RBLX Stock Price And Technical Analysis

Roblox stock surged more than 42% on Nov. 9, breaking out past a 103.97 buy point in a consolidation — according to IBD MarketSmith chart analysis. The catalyst was the company's strong earnings. But after a huge pullback in shares, the stock is trading about 80% off its 52-week high, and is sharply below its key 50-day moving average and long-term 200-day line.

Bearishly, the stock's relative strength line is far from its old highs and is hitting a new 52-week low because of the stock's poor price performance. The RS line measures a stock's price performance vs. the broad market.

According to the IBD Stock Checkup, RBLX stock has a weak 21 out of a perfect 99 IBD Composite Rating. The Composite Rating — an easy way to identify top growth stocks — is a blend of key fundamental and technical metrics to help investors gauge a stock's strengths.

Is Roblox Stock A Buy Right Now?

Roblox stock is one of the metaverse stocks to watch in the current stock market rally. The video game platform boasts solid sales growth in recent quarters amid the company's potential in the emerging metaverse investing theme.

Shares are now pulling back sharply and are significantly off their 52-week high. Amid the current stock market volatility and Roblox's precipitous drop, the stock isn't a buy right now. Wait for the stock to form a new  base, which would offer a new buy point.