What do you think of Roblox stock valuation?
Oct 20, 2021
5 Comments
It was supposed to IPO at 20$ before it went to 45 and then finally 67.
I’m considering a position at Roblox but I’m not sure if its a good gamble (stock valuation wise; definitely not as good a stock as microsoft whose PT just went to 375 by analysts)
Tc: 200
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Twitter has a valuation of 50 billion, while having around a quarter billion daily active users.
Snap has a 300 million daily active uses, while having a valuation of 120 billion.
Fb has 2 billion daily active users, about trillion dollar valuation.
Now let’s look at roblox… between 40 and 60 million daily active users… with a 40 billion-ish valuation.
But not all daily active users are the same though. All have to each resort to either user growth or getting better dollar per users.
Video games, particularly free ones, have whales to lean on in their business models. Whales being customers that spend so much that it makes them statistically significant outliers. Entire mobile video game businesses are able to exist thanks to this distribution of spending. Roblox as a platform has some big competitive advantages, like UGC and being cross platform and lightweight. There are very few game engines that can do this, particularly making it so easy for content creators (see the squid games and how fast they appeared, without official oversight).
Lastly, let’s think about the avenues roblox can go down for revenue.
1) subscriptions and typical video game spend. This is the usual model, and can be quite lucrative (see Riot Games revenues per title). Roblox already does great here, and will be able to lean on this with user growth.
2) sponsorship — this is a new one. typically, video games may do a few partnerships with brands, but Roblox is able to productize this and produce a whole class of high paying users. It’s usually not very straightforward if you’re a company, in say shoes, and you want to make a “game” to promote a product.
3) advertisement — completely in an infantile stage on the product. They can put traditional ads if they ever get truly desperate for revenue, but the unique thing is they can sell ad space and tools right back to their users that want to get more people playing their games.
4) Events with meta elements — imagine every major event having a “Roblox” version alongside it. In the same way that today, we see a mobile app or tooling produced alongside them. This can take the form of music releases, content drops, or just commemorative games that live on and can act as an additional revenue stream for content creators.
I’m not saying Roblox is the only candidate for this. Companies like Epic Games, competitors to Roblox, and even companies like Snap or Amazon are equipped to push for the above streams. People saying it’s overvalued don’t have any context as to how much a highly successful modern free-to-play game can produce in $, nor do they realize that Roblox can represent more than just a bunch of “kids” and their iPads. Platforms are powerful.