Roblox Share Forecast January 2022 – Time to Buy RBLX?
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Shares of online gaming company Roblox (NYSE:RBLX) are in the green today after closing at $58.18 as of January 28th (19:59 EST). Roblox investors have had a bumpy ride lately as the shares have dropped more than 55% from a high of $140. While existing investors are not happy, the lower share price provides an opportunity for others to buy-in.
Roblox- Technical Analysis
According to the financial statement of the company, the market cap is at $33.677 billion with total assets worth $3.272 billion. Revenue for 2020 was at $923.88 million with a profit margin of -27.41% compared to $508.39 million in 2019.
Moving averages such as Exponential Moving Average (10)(68.32), Simple Moving Average (10)(69.10), Exponential Moving Average (20)(77.16), Simple Moving Average (20)(79.70) and Exponential Moving Average (30)(82.86) are indicating a sell action. Oscillators such as Average Directional Index (14) (32.93) and Awesome Oscillator(−26.37) are neutral.
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Recent Developments
Roblox is now starting to focus more on the Metaverse by focusing on the social side of the equation instead of focusing on augmented and virtual reality. Roblox has a unique business model which allows players to create their own experiences. As of the third quarter, the com[pany has amassed 47.3 million daily active users (up 31% from the prior-year period). The user base consists of over half of the United States kids under the age of 16.
Global athletic brand Nike, announced the creation of its own Roblox world called NIKELAND in November last year. It allows users to interact with friends and features a digital showroom allowing users to outfit their avatar with products. Similarly, reality TV star Paris Hilton also has a similar project on Roblox called Paris World. Roblox shares are currently trading at a price-to-sales ratio of 40 and at a significant premium to the S&P 500 average of three. It has a high valuation despite revenues soaring 102% to $509 million in Q3.
Should You Buy RBLX Shares?
Investors have many reasons to consider Roblox as a compelling investment. It has recorded strong financials, evidenced by its revenue growing threefold from $313 million in 2018 to $924 million in 2020. It demonstrates the resilience of Roblox’s business model. Roblox’s user-base will diversify from the early gaming-centric community as its use case expands. This will certainly help the company’s monetization effort. Currently, it generates revenue from taking a cut on every virtual transaction. In the future, it hopes to expand its income streams by launching new services such as advertising, subscriptions and e-commerce.
Roblox is still taking losses which means that the majority of its intrinsic value will come from future cash flow many years ahead. In this context, future cash flow will become more valuable due to a higher –interest rate. The company’s valuation may come down in the short term if the company fails to keep up with those expectations, such as sustaining its high growth rates.
Roblox is well-positioned to expand its use case and ride the metaverse trend. However, this is only possible if it attracts and delights its developers and users. Roblox is still expensive after its recent correction. Thus, for investors looking to capitalise on Roblox’s prospects, they may have to way. They should look for a better entry point, or initiate a small position now and add to that position over time as the company executes. Considering this, now is still not the time to buy RBLX.
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