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Roblox: Already Priced For Next Growth Mode

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Roblox Developer Conference 2019

Ian Tuttle

In nary surprise, Roblox Corporation (NYSE:RBLX) is backmost to a maturation instrumentality aft nan covid boost rolled off. The marketplace has a acold much affirmative position of nan institution now, though personification maturation has been beardown all on and predictive of this maturation phase. My finance thesis is much Neutral connected RBLX banal supra $40, pinch Roblox afloat weighted for an situation pinch 20% growth.

Finviz Chart

Source: Finviz

Focus On Users

The eventual cardinal to investing successful Roblox complete nan agelong word is to attraction connected personification growth. The banal will bounce astir based connected volatile monthly and quarterly bookings, but nan business will win aliases neglect based connected nan expertise to grow users.

During nan covid period, Roblox was very successful astatine increasing regular progressive users (DAUs). Users instantly jumped from only 23.6 cardinal successful Q1'20 to 33.2 million successful nan June quarter, erstwhile nan world unopen down.

DAU slide

Source: Roblox Q4'22 position

Roblox conscionable reported January 2023 DAUs of 65.0 million, up 19% YoY and a large jump from nan 58.8 cardinal DAUs successful some Q3 and Q4. Even hours engaged were up 19% successful January, to 5.0 billion.

January '23 metrics slide

Source: Roblox Q4'22 position

All users aren't equal, but arsenic agelong arsenic Roblox continues increasing users, nan institution tin activity connected nan monetization of existing customers astatine higher levels starring to bookings growth. The cardinal world ABPDAU metric isn't arsenic useful owed to shifting personification bases, but nan world gaming level has returned to increasing this metric, pinch a $4.14 target for January starring to 3% to 4% maturation connected a changeless rate basis.

In nary surprise, Roblox surged aft reporting Q4 results and providing January 2023 metrics. Somehow, though, nan institution hit expert statement estimates by astir $15 million, pinch Q4'22 bookings of $899 million, while my erstwhile article highlighted nan guidance added up to bookings of $892 cardinal for nan quarter.

Either way, Roblox is now connected a way for 20% yearly maturation again. The bigger nan platform, nan much nan web effects work. The institution has plentifulness of catalysts for growth, including aging up to 24 years aged (39% maturation successful January) and moving into intermezo and communications to move acold beyond games pinch animation and interactive technology.

Another bully motion is that adjusted EBITDA saw a melodramatic betterment pinch a rebound to $183 cardinal successful nan December quarter. The metric was somewhat supra nan $168 cardinal produced past year, but much importantly, Roblox reported a immense boost supra nan anemic metrics successful nan anterior 3 quarters.

As pinch astir tech companies, Roblox should now person nan disbursal building much successful statement pinch expected maturation aft dense spending pursuing nan covid boost.

Consolation Phase

Our anterior article highlighted nan apt move of nan banal towards nan debased $40s. After nan beardown Q4'22 results, Roblox soared to $46, and investors should've dumped nan shares connected nan large rally.

article

Source: Stone Fox Capital

Roblox Corporation reported awesome numbers, but nan banal is now already afloat weighted and needs to consolidate for a while aft nan rally from $25 successful mid-December. The marketplace headdress is now $25 billion, pushing nan guardant EV/S aggregate to somewhat supra 7x.

ChartData by YCharts

Analysts look somewhat conservative, only forecasting 15% bookings maturation successful 2023 to scope $3.3 billion. Roblox has ~$2 cardinal successful nett cash, pushing nan endeavor worth down to $23.0 billion.

Roblox Corporation banal tin decidedly waste and acquisition astatine higher multiples, but Roblox is now 1 of nan astir costly equities connected nan marketplace owed to nan excitement complete nan Metaverse and nan return to bookings maturation aft a play of anemic results. Also, nan institution conscionable isn't forecasted to nutrient nan excessive 30%+ maturation rates of pre-covid periods pinch nan personification guidelines now hitting 65 cardinal and nan larger standard reducing nan maturation rates.

Takeaway

The cardinal investor takeaway is that Roblox Corporation is backmost into afloat maturation mode, pinch a beardown balance sheet to money investments. The banal is much afloat valued, already trading astatine 7x EV/S targets connected nan rally to $40.

If Roblox Corporation banal closes nan spread backmost to $35, investors tin safely load backmost up connected Roblox. Otherwise, nan semipermanent returns will beryllium mostly muted to nan yearly bookings maturation successful nan 15% to 20% range.

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Editor: Naga



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