To The Moon

$Roblox Corporation(RBLX)$ is due to release its first-quarter earnings results before the market opens on this Wednesday.

It is a popular online gaming platform targeting young children, and was listed on 10 March 2021 when its share price rallied to close at 69.50, a hefty 54% above its IPO price of $45. I had jumped onto the bandwagon after noticing the popularity of the platform among kids including my children who would spend hours playing games on it whenever time permits.

Roblox is among pioneers in the development of gaming experiences in the metaverse that is the emerging digital frontier that has attracted investments from the likes of $Meta Platforms, Inc.(META)$  which had even renamed itself as part of its rebranding and strategic plan to create a metaverse across its platforms. What differentiates Roblox from other online game platforms is its ability for users to create their own games and invite friends and others to join in playing them. A developer is then rewarded with 30% of the proceeds generated from the game, such as the sale of virtual outfits and avatars. This has made the platform hugely popular with kids tired of playing existing games and would like to try a go at creating their own.

Roblox flourished during the onset of COVID-19 pandemic when most children were confined to home-based learning and outdoor activities and entertainments were largely restricted. However, since peaking at $134.72 on 19 November 2021, Roblox's stock price has been on a general decline. As recently as 17 April just this year, its share price plunged 12% after the company disclosed key metrics for March that showed a drop in average bookings per daily active user, even though its March revenue was estimated to be between $212 million and $223 million, up 15-21% from the same period last year. Roblox revealed that its average bookings per daily active user fell between $3.73 and $3.85 in March, down 1-2% from last year, albeit primarily due to foreign currency fluctuations. Bookings per daily active user are a big deal for gaming and social media platforms as they are a gauge of the sustainability of future earnings.

The technical charts are not looking good for Roblox either, as its share price remains firmly below its 50- and 200-day lines. It remains to be seen if the resistance may be broken and turned into support when the company posts its latest earnings this week.

I'm not that hopeful. While I'm staying invested in Roblox as a proxy metaverse play, I can't help but be bearish on its short-term outlook. With borders reopened and kids returned to school, Roblox has to innovate and reinvent itself to remain relevant post-pandemic, while at the same time stay ahead of rising competition in the metaverse.

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