Breaking Down Roblox By The Numbers, Here’s What Investors Need To Know

Key Takeaways

• Roblox reported mixed earnings with year-over-year growth in the number of users and revenue, but these were lower compared to the previous quarter.
• The outlook for Roblox is good as the company reported positive insights for the upcoming third quarter.
• Recession fears and high inflation should have a negative impact on the stock price in the short term, though RBLX closed at $45.50 yesterday, up 10.33% on the last five days and 24.35% for the month.

Roblox has become a worldwide staple in households with children and pre-teens looking to earn a little money while experimenting with game development in a semi-virtual setting. The company recently reported a mixed bag with its second quarter earnings. Here is what investors need to know about the stock and future outlook.

Roblox Stock in the news

Roblox, a popular interactive social gaming platform, released its second quarter earnings, and it was a mixed report. On the positive side, the company saw an increase in active daily users (ADUs), from 47.3 million in the second quarter of the 2021 fiscal year to 52.2 million in the second quarter of the 2022 fiscal year. This represents a 10% increase. However, active daily users are down 4% from the first quarter of 2022.

Roblox also reported an increase in engagement hours for the current quarter to 11.29 billion, up from 9.73 billion hours for the same period a year ago. This represents a 16% increase. However, as with active daily users, the second quarter number fell below the 11.82 billion the company had in the first quarter of this year.

Roblox is emerging from the pandemic as a stock that’s worth watching. The stock price rose to a high of $134 in November 2021 but has since fallen to $42 per share. This was due to multiple factors, including uncertainties around its ability to post a profit as currency exchange rates remain volatile. Of its 52.2 million users, roughly 12% come from the U.S. and Canada, so exchange rates significantly impact the company’s bottom line.

Another factor is the weak stock market. Due to inflation, the Federal Reserve raising interest rates, and fears of a recession, the stock market is down close to 20% for the year. Technology stocks tend to perform worse during times of high inflation, and that’s exactly what they are currently doing.

Income Statement

Roblox’s latest income statement (dated June 30, 2022) represents the second quarter of the 2022 fiscal year. Its total revenue for the second quarter was $591.2 million, an increase from $454.1 million for the same quarter in 2021. The company had revenue of $1.12 billion for the first 6 months of 2022, which increased from $841 million for the first 6 months of 2021. Roblox reported total costs and expenses of $761.4 million and a consolidated net loss of $178.7 million, with $170.2 million of that loss coming from operations.

Balance Sheet

The company states it has $3.1 billion in cash and cash equivalents, a total of $186.8 million in accounts receivable net of allowances, and a total of $4.9 billion in total assets. Its accounts payable total $77.5 million, and its liabilities total $4.36 billion.

Roblox does not consider its bookings, what it calls revenue, as income until a user redeems their in-game currency for purchases. It places the unspent currency, or Robux, into its deferred revenue column, which for the second quarter totaled $639.9 million, down from $665.4 in the first quarter. For the six months ending the second quarter, bookings are down 4%, from $1.3 billion to $1.2 billion.

In its earnings report, Roblox stated they expect to recognize $1.8 billion as revenue from bookings over the next 12 months. Total stockholder’s equity was $551.5 million, with the total liabilities and stockholder’s equity coming to $4.9 billion.

Outlook for Roblox stock

Roblox’s initial public offering in March 2021 was a blessing and a curse. The company saw an explosion of daily active users and hours engaged as kids spent their entire day at home due to the pandemic. Now that kids have returned to school and activities, users have had less time to engage on the platform. Roblox’s stock price shot to a high of $141.60 in November 2021, and stock analysts predicted the price would go as high as $230 in the coming 12 months.

However, this prediction failed to come true as the stock price tumbled sharply to a low of $23 in May 2022. The stock has recovered some of its value but is currently trading at around $43, a price lower than its initial public offering of $69.50. A slowdown in growth, a lack of profitability, and the effect of rising interest rates on tech stocks have all impacted the stock price.

Roblox’s income model is based on the sales of its in-game currency, advertising, and licensing. The platform caters to kids ages 15 and younger, which could be a potential issue as an ongoing population decline results in fewer children being born in many areas around the globe. While this is an issue for all industries aimed at children and teenagers, it could negatively affect Roblox’s income in the future as it relies on high numbers of ADUs to generate a portion of its income.

The concept behind Roblox has staying power as evidenced by the fact the company has been around for almost 20 years. The past success of Roblox depended on the people that make up Gen Z, and they were enthralled by the opportunity to create games for others to play while earning a little money.

Looking ahead, Roblox gave some insights into its third quarter during the earnings call for the second quarter. For July 2022, the company stated that daily active users increased to 26% year-over-year for a record high of 58.5 million. Bookings for July increased 8-10% from July 2021 to $243-$247 million.

Bottom Line

Roblox stock has the potential to deliver steady returns in the near term, but its dependence on a large user base with a limited age range can make it harder for the stock to retain its value in the long term. However, Roblox is considered a virtual reality universe, focusing on connecting users through games and groups. There’s a lot of potential for the stock to grow in the event Roblox can spin its core concept into something that captures a broader range of users — and if they can beat Meta to the punch in creating a virtual universe.

This is a great example of an emerging tech stock, it is also likely to be part of an oncoming tech rally when the market starts heading north again. Q.ai offers Investment Kits in both of these areas, as well as one-click Portfolio Protection to reduce your losses, no matter what industry you invest in. Our artificial intelligence scours the markets for the best investments for all manner of risk tolerances and economic situations.

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