Is this video game name a buy?
It’s time to explore a new name to the market. Here is the break down on $RBLX, otherwise known as Roblox.
Current Price: $82.59
52/Wk High: $103.87
52/Wk Low: $60.50
Market Cap: $47.1 Billion
Read below for the break down!
Roblox ($RBLX) is a unique online entertainment platform that allows developers and users to create their own multiplayer experiences. Furthermore, the company’s platform allows users to learn, explore, and communicate.
The company is led by CEO and founder David Baszucki. Baszucki founded Roblox in 2004 with the goal of creating a platform that allows for shared user experiences, or what experts call a co-experience platform.
Roblox’s management team is made up of leaders with prior experience from the likes of Google, YouTube, Zynga, Nextdoor, Walmart, TripAdvisor, Cloudera, and more.
In recent news Roblox was hit with a major $200 million lawsuit by the National Music Publishers Association (NMPA), accusing the company of copyright infringement.
Roblox responded saying “We are surprised and disappointed by this lawsuit which represents a fundamental misunderstanding of how the Roblox platform operates and will defend Roblox vigorously as we work to achieve a fair resolution,”.
It is important to note that Roblox does monitor for copyright infringement and consistently scans for any unauthorized recordings. The company also has held and acted on the policy that any valid Digital Millennium Copyright Act (DMCA) requiring removal is followed with the removal of applicable content.
Digging into the numbers Roblox missed Q1 2021 expectations with an EPS of $-0.46, lower than the analyst’s EPS consensus estimate of $0.13. Do note, on a year-over-year basis, EPS declined by a slim $0.02 from $-0.44.
While EPS declined, revenues impressed, jumping by 140% year-over-year to a strong $387.0 million. For reference the Q1 2020 revenues level was $162.570 million.
Furthermore, net loss expanded to $-134.2 million, a much larger loss than the Q1 2020 net loss of $-74.379 million.
While Roblox did run a significant net loss, the company nearly increased their net cash provided by operating activities by four times, with $164.5 million in net cash provided by operating activities in Q1.
Not only that but bookings improved significantly as well, with bookings totaling $652.3 million in Q1, representing a 161% jump on a year-over-year basis.
Shifting into cash flows, free cash flow increased by 4.1 times, bringing total free cash flow to a stronger $142.1 million.
On the user front, average daily active users (DAUs) totaled 42.1 million in Q1, representing a 79% increase on a year-over-year basis. Sifting through user data, DAUs outside of the US and Canada expanded by 87%.
Rounding out the quarter, average bookings per daily active user (ABPDAU) totaled $15.48, representing a strong 46% increase in ABPDAU on a year-over-year basis.
Management was upbeat.
“We believe we must continue to innovate and so remain focused on building great technology to make progress on our key growth vectors, primarily international expansion and expanding the age demographic of our users,” CFO Michael Guthrie said.
Shifting into the balance sheet the numbers are solid.
Total Debt: None
Total Liabilities: $2.243 Billion
Total Assets: $2.816 Billion
Cash & Short Term Inv: $1.601 Billion
On a valuation basis, Roblox does trade at a premium.
Forward Price to Earnings: 101.71x
Price to Sales: 40.15x
Price to Book: 81.77x
Given the numbers the analysts are bullish with a mean price target of $87.33/share, representing a 5.75% upside.
The high price target is $103.00/share, representing a 24.71% gain, while the low price target is $78.00/share, representing a -5.56% downside.
The big money is quite involved with 71.88% of Roblox being owned by institutions. Top holders include Altos Ventures Management, Index Ventures, and Meritech Capital Partners.
On a technical basis, Roblox could be presenting opportunity. According to the six-month charts the MACD is moving with significant downside momentum within a range of 4.56 down to 2.91.
The six-month charts are also indicating an RSI of 45.36 and CCI of -90.61, both of which are roughly neutral.
On the risk front, investors fear a user growth slowdown and the complications of the recent NMPA lawsuit.
In short, Roblox ($RBLX) is a solid digital entertainment pick with expanding revenues, a strong leadership team, solid balance sheet, improving cash flows, and growing industry.
EAT - SLEEP - PROFIT
Disclaimer: This is not direct financial advice, simply an opinion based on independent research.