Roblox (NYSE:RBLX) is a company that traditional investors might not understand. Yet, Roblox stock is making a big-time move on robust bookings growth. So, I am bullish on RBLX stock and I suggest that critical investors should open their minds to this unique metaverse opportunity.
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Really, Roblox provides more than just video games. Rather, the company’s platform offers immersive experiences with metaverse functionality. Sure, this type of activity typically appeals to children and teenagers, but it’s open to anyone who wants to participate.
You don’t actually have to be involved with video games and virtual reality to appreciate Roblox’s growth story. Even a staunch pragmatist ought to understand that if users are flocking to Roblox and spending money on the company’s platform, RBLX stock can quickly move higher.
Roblox Stock Goes Vertical
Roblox stock has been all over the place in 2023, but today, it surged on unusually heavy trading volume. With that, the September dip to $25 may be the bottom for RBLX.
Even before today’s share price move, Truist analyst Matthew Thornton had already offered an optimistic outlook for Roblox. Thornton upgraded Roblox from Hold to Buy and hiked his price target on the shares from $35 to $37. If the stock stays near $40, though, then he and many other analysts will probably have to revise their price targets higher.
Thornton couldn’t possibly have known that Roblox would knock it out of the park with the company’s third-quarter 2023 financial results. If there were any doubts that Roblox could monetize its immersive experiences, those doubts can now be put to rest.
If any metaverse-associated business could offer a turnaround story in 2023 and 2024, it’s Roblox. The company isn’t profitable and hasn’t had a great track record when it comes to quarterly EPS beats versus misses.
Yet, at least there was a beat this time. Analysts predicted that Roblox would report a quarterly loss of $0.49 per share, but the actual result was a loss of $0.45 per share.
Roblox: Looking at the Bookings
Roblox’s Q3-2023 revenue increased by 38% year-over-year to $713.2 million. Evidently, the business of providing a gaming platform can be quite lucrative.
Still, Roblox’s revenue doesn’t really tell the full story. First of all, it looks like Roblox is keeping certain costs down. Specifically, the company’s Q3-2023 capital expenditures totaled $53.2 million, down 60% year-over-year and down 52% quarter-over-quarter.
This helped Roblox achieve free cash flow of $59.5 million in 2023’s third quarter, a remarkable improvement over the company’s free cash flow of -$67.7 million (that’s negative, not positive) in the year-earlier quarter and -$95.5 million in the second quarter of 2023.
Moreover, Roblox’s critics ought to observe that Roblox reported sizable increases in active engagement. The company’s third-quarter 2023 average daily active users (DAU) count increased by 20% to 70.2 million, the number of average monthly unique payers grew 14% to 14.7 million, and Roblox’s volume of hours engaged spiked by 20% to 16 billion.
The crown jewel of Roblox’s quarterly report, however, was Roblox’s bookings. This is a measure of Roblox’s virtual currency sales on its platform. As it turned out, the company’s bookings increased by 20% year-over-year to $839.5 million, and this result beat the consensus estimate of $822.21 million.
Is Roblox Stock a Buy, According to Analysts?
On TipRanks, RBLX comes in as a Moderate Buy based on 16 Buys, two Holds, and four Sell ratings assigned by analysts in the past three months. The average Roblox stock price target is $38.45, implying 2% downside potential.
If you’re wondering which analyst you should follow if you want to buy and sell RBLX stock, the most profitable analyst covering the stock (on a one-year timeframe) is Mike Hickey of Benchmark Co., with an average return of 11.93% per rating and a 60% success rate. Click on the image below to learn more.
Conclusion: Should You Consider Roblox Stock?
Roblox CEO David Baszucki was understandably proud of this company’s quarterly performance. “Our strong third-quarter results reflect our continued platform innovation and growth across all age groups and geographies,” he declared.
In other words, virtual gaming and the Metaverse have no borders, and they’re not just for kids and teens. This is serious business, and Roblox is riding a tech trend that could become an enduring phenomenon. Therefore, I’d say that today’s vertical move in RBLX stock is justified, and I believe that investors should consider a position in the stock.
