Roblox Share Forecast November 2021 – Time to Buy RBLX?
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Shares of American video game developer Roblox (NYSE:RBLX) are in the green today after closing on $116.18 as of November 16th, (19:59 EST). The shares surged for the fourth trading day in a row with seemingly no reason behind it.
Roblox – Technical Analysis
According to Roblox’s financial statement, the market cap of the company is at $67.51 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.
Oscillators for Roblox such as Relative Strength Index (14)(70.84), Stochastic %K (14, 3, 3)(91.80), Commodity Channel Index (20)(177.65), Average Directional Index (14)(32.95) and Awesome Oscillator(21.17) is neutral. Moving averages such as Exponential Moving Average (10)(99.03), Simple Moving Average (10)(95.06), Exponential Moving Average (20)(91.70), Simple Moving Average (20)(88.43) and Exponential Moving Average (30)(88.29) are indicating a buy action.
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Recent Developments
Roblox is a platform which allows users to interact with each other inside a virtual environment or metaverse. Initially created as a Beta under the name DynaBlocks in 2004 by co-founders David Baszucki and Erik Cassel, the company changed its name to Roblox in 2005. The company experienced a surge of new signups when most of the world was hunkering down at home to avoid a deadly virus. As the company’s product can be enjoyed from the safety of one’s home, this was not surprising. On November 8th the company reported fiscal third-quarter results that please investors as it showed an addition of 4.1 million daily active users (DAU) from the previous quarter. At the end of Q3, the company boasted 47.3 million DAU which is 11 million higher than the third quarter of last year.
Bookings for the company increased by 28% year-on-year to reach $637.8 million. Quarterly revenue came in at $509.3 million. The main reason behind the company losing money this quarter is its spending towards paying its game developer partners well and in spending on research and development. It is also working towards making its gaming environment, trustless and stable.
Roblox is free to join and use and the company’s main revenue comes from selling an in-game currency called Robux. This also goes towards compensating developers for creating unique experiences and objects within the game. An increase of players will create increased revenue chances for developers. Investors are doubling down on the shares due to the company’s asset-lite business model and continued momentum, despite the gradual economic reopening. The latest quarterly announcement caused shares to surge by 30% and dispelled concerns among investors that the business would suffer in a post-pandemic world.
Should You Buy RBLX Shares?
Investors interested in RBLX have a lot of positive metrics to rely on. With the latest surge in share price, RBLX is now trading with a price-to-free -cash ratio of 88, which is the highest in its history as a public company. It has also displayed its ability to generate free cash flow where it went from less than 10 million per quarter in 2019 to over $100 million in the last 5 quarters.
With more than $488 million in positive free cash flow, Roblox is still on track to churn out $650 in cash profit through the end of 2021. The past 2 quarters have shown a 15% decline in the company’s free cash flow margin. Currently the shares are valued at an extremely high rate which is 87 times FCF making it an already high priced company. Considering this, now is not the time to buy RBLX shares.
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