After Roblox delivered better than expected earnings results for the last three months, its stock shot up 25 percent to $45 per share Feb. 15. As the only public company focusing exclusively on the metaverse, some experts argue, Roblox’s surge represents a continued bet on the technology’s potential from investors.
The online game platform is one of the few accessible and working metaverse worlds. Gamers—mostly children and teens—can customize their avatars, play games made by other users and purchase items with Robux, the game’s virtual currency, all without having to own a headset.
Many public companies are investing in metaverse technologies, including Meta, Microsoft, Nvidia and Unity. But for all of these companies, metaverse innovation is one part of a much larger business. Meta’s social media sector is financing its metaverse initiatives. Microsoft has its software business, and Nvidia sells computer hardware. Unity develops video games for a variety of consoles.
Roblox is the only “pure-play” metaverse stock in the market, according to Neena Mishra, a research director at Zacks Investment Group who spoke with Blockworks, a financial information publisher. While the metaverse is still largely unproven, the Roblox stock could be a window into how investors feel about its potential. And for big believers in the metaverse, Roblox is the best way to invest in it.
After its initial pubic offering at $64.50 in March 2021, the Roblox stock hit a high of $135 in November of that year, following better than expected earnings results. It fell over a period of seven months to trade at $24 per share in June 2022. Over the last year, the stock has been fluctuating between $23 and $54.
Not all are convinced
Some Wall Street analysts aren’t convinced in Roblox’s immediate potential. Over the next year, there is more risk than reward for shareholders as the company positions itself for the long-term, Goldman Sachs analysts wrote in a report shared via email. The investment bank’s analysts suggested investors should sell. Roblox is still well-positioned for long-term growth, they wrote, as long as it can keep users as they get older and increase its profits.
Analysts at Barclays marked the stock “underweight,” meaning investors should sell or refrain from buying. The analysts said competition in the sector will continue to intensify but Roblox can also capitalize on artificial intelligence technologies to develop content within the next few years. The consensus among 30 analysts is to hold the stock, according to CNN Business.
Roblox increased its revenue year-over-year by 16 percent, ending 2022 at $2.23 billion. Its daily active user statistic grew to 58.8 million in the three months ended Dec. 31, up 19 percent from the same time last year. Users are also spending more money on the platform, with players purchasing 17 percent more Robux year-over-year.