Categories Analysis, Technology

Roblox (RBLX) shines after blockbuster IPO; what the future holds?

Expects to generate $1.5 billion in revenues and $2.1 billion of bookings, on an adjusted basis, in fiscal 2021

The stock market debut of Roblox Corporation (NYSE: RBLX) came at a time when the gaming market is thriving on the COIVD-driven spike in demand. With investors responding positively to the perfectively-timed offering, the game creation platform’s valuation surged soon after the IPO.

The Game Plan

On the first day of the IPO, the company’s value crossed $45 billion, making it worthier than some of the market-leading gaming companies. The stock started trading on the New York Stock Exchange on March 10 through a direct listing, under the ticker symbol RBLX. While the overwhelming response surprised many, the company’s unique model is expected to set a new paradigm in interactive entertainment. But the question is whether the current trend is sustainable.

Established in 2004, Roblox offers a platform to young children for a digital experience that allows them to play games and interact with other users in a global community. Of late, both developers and young gamers have been flocking to the Roblox platform, lured by its innovative features. Though the stock’s post-IPO performance has been encouraging, the unusually high valuation calls for caution as far as investing is concerned, especially in these uncertain times.

Mixed View

Currently, the company has about 33 million daily active users. It expects to generate $1.5 billion in revenues and $2.1 billion of bookings, on an adjusted basis, in fiscal 2021. Meanwhile, the outlook assumes an estimated drop in organic growth amid softening demand due to market re-opening. Last year, the business benefited significantly from the spike in the consumption of digital content after the shelter-in-place orders came into effect.

Read management/analysts’ comments on quarterly results

On the positive side, the company is an experienced and established player and market watchers following the stock are bullish on its future prospects so far. Also, Roblox looks well-prepared to monetize new opportunities and the transformation the online gaming space is witnessing.

The focus of the management’s growth strategy is to make inroads into international markets like Western Europe and East Asia, starting next year, and to expand the services to older users. The plan also includes foray into other entertainment venues.

Kids’ Safety

Meanwhile, concerns are being raised about the safety of the platform that allows children to interact and make friends with strangers. But the promoters of Roblox shrugged off the fears claiming they have created a safe and secure environment that allows healthy cultural exchange.

Roblox’s shares are currently trading slightly below their post-IPO peak but sharply above the listing price. The stock closed the last trading session sharply higher and hovered near the $70-mark.


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