Roblox Share Price Forecast December 2021 – Time to Buy RBLX?
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Shares of online game platform Roblox (NYSE: RBLX) are in the red toda, after closing at $98.74 as of December 28th (19:59 EST). Earlier in the month, Roblox released its November operating metrics update which worried investors about the company’s near-term monetization trends.
Roblox – Technical Analysis
Roblox’s financial statement indicates that the market cap of the company is at $57.154 billion and 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 such as Relative Strength Index (14)(43.96), Stochastic %K (14, 3, 3)(26.24), Commodity Channel Index (20)(−88.51) and Average Directional Index (14)(18.14) are neutral. Moving averages such as Exponential Moving Average (10)(103.43), Simple Moving Average (10)(101.29), Exponential Moving Average (20)(105.99), Simple Moving Average (20)(109.05) and Exponential Moving Average (30)(105.64) are indicating a sell action.
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Recent Developments
Roblox is considered one of the pioneers of the metaverse. It is most popular among the younger demographic, with almost 50% of its user base under 13 years old. This demographic contributed immensely owing to the onset of the pandemic when schools were closed and extracurricular activities were paused. Some signs point towards new user growth decelerating to levels lower than before the outbreak. Thus, many investors believe that Roblox could have difficulty adding new users when or if the world fully puts the COVID-19 pandemic behind it.
In the fourth quarter of 2020, the company’s average bookings per user hit a peak of $17.30 which has steadily declined to $13.49 in Q3. November’s update didn’t do this any favours by indicating that this slide has continued. This could lead to the fourth straight quarter of declines in this metric when Roblox reports Q4 earnings early next year. Management attributes the decline in average bookings per user this year to a shift in the geographic mix of its user base. This means that daily active users are growing faster than they can monetize.
Should You Buy RBLX Shares?
Investors should first look at the metrics as reported in the company’s November update. Roblox’s year-over-year daily active users grew 31% and total hours engaged increased 28%. The increase in the number of daily users has balanced out the decrease in in-app purchases. The user growth also resulted in a higher overall total of virtual items being purchased allowing Roblox’s revenue to grow 102% year over year.
Roblox has announced several plans for the future. This is evidenced by Roblox’s 18% increase in experiences where the majority of users were 13 and older. It has recently hosted a concert by the hit music group Twenty One Pilots that led to over 1 million hours in engagement.
Whether Roblox is a buy or sell depends on the investor’s assessment of how user behaviour will evolve as the economy slowly reopens. If Roblox can sustain user engagement despite other entertainment options, it will be an enticing stock to invest in. On the flip side, if user engagement decreases as out-of-the-home activities become available again, then investors should stay away from it.
Average bookings per user for Roblox are increased by 50% over the first quarter of 2019. The management reiterated its long-term goal to reach 1 billion daily active users. Currently, Roblox is experiencing solid top-line growth and free cash flow. Based on this, one can easily add Roblox shares to one’s portfolio.
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