Following its first public offering in March 2021, Roblox Stock (NYSE:RBLX) briefly became a stock market favorite. However, as growth has slowed and volatility has roiled the larger market, the tale behind Roblox stock (NYSE:RBLX) has shifted.
Roblox stock (NYSE:RBLX) price has been down 64% this year, and it is down 72.5% from its high late last year. Let’s look at the positive and negative reasons for the stock to see what happens next for Roblox.
Bear Sentiment: Roblox stock is not a lucrative venture.
Roblox did a fantastic job of attracting people to its metaverse platform, but it wasn’t difficult, given that the popular gaming platform is free to join and use. Roblox earns income through selling Robux, an in-game currency that grants players access to premium things and activities.
While Roblox’s income has increased rapidly in recent years, the firm has had difficulty repaying profits to shareholders. To decrease personnel expenditures while still attracting people, the corporation compensates a significant portion of its staff with stock-based compensation. This enhances Roblox stock (NYSE:RBLX) count while diluting the stock value of stockholders.
Roblox may be brilliant at gaining players, but it has yet to demonstrate its ability to generate revenues. That’s a losing bet for an investor.
Bull Sentiment: The core of Roblox is quite promising.
Roblox stock (NYSE:RBLX) did see actual performance losses due to a weakening of pandemic-related tailwinds, as well as perceived declines due to difficult comparisons to excellent performances in 2020 and 2021. However, it seems that Roblox stock (NYSE:RBLX) is returning to growth mode. According to a study issued last week, the company’s bookings increased by 5% to 7% year over year in August, and its daily active user count increased by 24%. Average bookings per daily active user are expected to dip 15% at the midpoint. However, this seems to be less alarming in light of robust user growth and the end of social distancing circumstances in much of the globe.
While Roblox stock (NYSE:RBLX) has been lacking in crucial measures for most of this year, the firm has a massive user base and untapped long-term growth potential. Roblox created significant incentives for its platform to continue to produce fresh content and experiences by enabling artists to monetize their work. This bodes well for Roblox’s long-term viability compared to other gaming platforms and metaverses.
Thus far, Roblox has focused on increasing its platform’s popularity and reach, but it may be building the groundwork for long-term profit growth. The longer the platform can keep customers engaged, the less attractive this company’s present price will seem.
Should you purchase Roblox stock right now?
Despite its dramatic value drop, Roblox stock is hardly a low-risk investment. If you believe the company will struggle to return to long-term growth or are concerned about the possibility of extreme volatility, Roblox stock is probably not for you.
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