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Is RBLX a Solid Long Term Investment?


How much do you know about Roblox stock? Traded publicly as RBLX, it is a stock that a lot of people have been seriously considering as a long-term stock option, especially recently. That said, you have to be careful when it comes to choosing your long-term stock options because if you choose the wrong ones, the portfolio isn't going to perform the way that you want it to. If you're not yet familiar with Roblox, they are a game developer, meaning that they're also a tech company. Tech stocks can be especially volatile, so if you're going to consider them for a long-term stock option, then there are obviously several points that you will want to consider before doing so. In order to make a decision based on solid information, it's time to take a closer look at this company in order to find out what they're all about.

What Sets it Apart from the Competition?

The first thing you have to know is that there are a number of things that set this particular company apart from the competition. They're one of the newest game developers to go public with their IPO. More importantly, they haven't experienced many of the same issues that other game developers experienced when they went public. As a matter of fact, they have remained stronger than virtually any other game developer immediately after going public and that sets them apart in and of itself. In addition, they're very close to catching their two major competitors, Activision and Electronic Arts. Perhaps the thing that genuinely sets them apart from the competition is that they don't operate in the same format that either of the aforementioned companies do. As a matter of fact, they don't rely on big releases at all. Both Electronic Arts and Activision make the majority of their money from blockbuster releases. On the other hand, Roblox operates on an entirely different business model. They have a tendency to release smaller titles that may not make as much money at any one given time, yet they release more titles by far when compared to their competition. They also keep their overhead at a minimum, meaning that even though they're releasing more titles, they're not spending as much money in order to do so. The end result is that they have more options available which translates into a higher profit margin. It may not be enough to convince everyone that they are a long-term investment option, but it's definitely an interesting point that's worth considering.

A Company in a State of Growth

It's worth noting that this is indeed a company that is in a perpetual state of growth. As previously mentioned, they're one of the newer companies to go public with their IPO, largely because they haven't been around as long as those other companies such as Activision or Electronic Arts. The fact that they are in a state of growth means that they haven't necessarily turned a profit yet, although their quarterly earnings show a number of promising things. For starters, they're making more money with each passing quarter. By the same token, they're not spending much more money when it comes to personnel, marketing or research and development. As a result, their costs remain almost the same while their profits are growing at a steady pace. Again, it's not enough to convince every investor that they are a good long-term stock option, especially given the fact that they are a tech company in the game development sector. That said, the way that they are conducting business is enough to make many other investors take a second look because they seem to have figured out how to develop games and bring in additional funding without spending more money every quarter in the process.

A Changing Landscape

Another reason that some stock market experts believe that this might be a good long-term stock option is because they believe that the entire landscape of investing itself is changing. Traditionally, many individuals have believed that it's best to stay away from tech stocks altogether as a long-term investment option because they are simply too volatile to predict with any degree of accuracy whatsoever. Over the last several years, that has started to change. Today, there aren't a lot of tech stocks that are solid long-term investment options but there are a few. Furthermore, experts believe that there will be even more in the future that fit this description. The truth is, many of them believe that Roblox is either at the forefront of this monumental change or that they are at the very least within the list of top 10 stocks that are worth watching.

It’s All About the Business Model

One reason that stock market experts give for their belief that this stock is a solid long-term investment option is the fact that they have a business model that isn't quite like anything else typically seen with tech stocks, especially those in the gaming industry. As previously mentioned, they don't do things the same way that other major game developers such as Activision or Electronic Arts do things. These companies rely on big releases that are capable of bringing in significant sums of money. They may only have one or two releases throughout an entire calendar year. As such, they are depending on those titles to bring in enough money to cover all of their overhead and make them a profit to boot. This company does things differently because they release more games on an annual basis. Most of their games don't reach blockbuster status, nor are they widely known among people who don't even pay attention to this particular industry like the games developed by these other companies are. That said, they aren't depending on this massive payday like the other companies, either. Instead, they can make a smaller profit with each game that is released and then culminate those profits over the course of a calendar year. Think about it this way. If you are only working for three months out of the year, you have to make a significant amount of money during that time in order to be able to support yourself throughout the entire year. Otherwise, you're going to run out of money six or seven months into the year and find yourself in a position where you're trying to scramble to make additional funds at the last minute. However, you can work 12 months out of the year and make less money each month while still being more comfortable, even after all of your expenses have been accounted for. When you think of it that way, it makes a lot more sense to do business the way that Roblox does it as opposed to some of these other companies that have been relying on blockbuster releases for several years. Even though companies like Electronic Arts and Activision have been in business for years, it only takes one bad year for them to shut their doors. Conversely, a company like Roblox is more resilient because they have income from more sources.

The Metaverse

In addition to everything that's already been discussed, there is one other important thing that might potentially mean that this company far exceeds expectations on the stock market. No one can deny that the very nature of the internet is changing. In fact, a lot of people expect it to continue to change dramatically over the course of the next few years. There's been a lot of talk of something called the metaverse, an internet that is submersive. Think of it as what you would get if you combined today's internet with the highest possible virtual reality technology. It's believed that you'll be able to throw yourself into a game through virtual reality and experience a world in cyberspace, almost as if you were experiencing it in real life. This is something that Roblox is counting on. In fact, it's part of their business model and serves as a major component of the business itself. That's because they have their system set up where people can not only become part of the game, but actually become a creator in order to expand the game so that it can go in an infinite number of directions. Some people consider it a risky move on the company's part because while the metaverse has been basically assured to happen at some point in the future, it hasn't exactly happened yet. That has led some people to wonder whether or not Roblox will be able to maintain their level of success if it doesn't go as planned. That said, most experts in the field agree that it is happening so the overwhelming majority of them feel like this is a question that doesn't even need to be debated.

Understanding the Numbers

Of course, it would be a mistake to try and understand any of this without looking at the numbers. After all, numbers don't lie. You can get opinions from stock market experts all day long, but it isn't going to do you any good if you don't know exactly how the stock is performing. Currently, the purchase price for a single share of Roblox stock is rather high, at $120.22 per share. That's enough to scare off a lot of investors and it's understandable why. After all, you're going to have to spend a significant amount of money in order to buy enough stock to serve any real money making potential in the long-term. At the same time, it's a rather significant investment risk because you're spending so much money on each share that if the stock tanks, you've invested quite a lot of money for something that you may not be able to recoup financially. That is where a lot of individuals who would otherwise jump at the chance to purchase this stock as a long-term investment to pause and consider whether or not they really want to spend that much money. As it turns out, there are a couple of different reasons that the stock costs so much money right now. Last November, the stock went up by more than 50%. In fact, by the time trading was done at the end of the month this particular stock was up 50.1% from where it had been the previous month. That is one reason that the current price is so high. It's also worth noting that for the month of December, it decreased, but not by a lot. In fact, it only decreased by 0.63%. There are a couple of different trains of thought here. The first is that the stock is worth paying more than $100 per share because it will only go up in the future. The second train of thought is probably a bit more realistic. It involves the belief that the stock will eventually start coming down, but that the company is strong enough to withstand a dip in stock prices while not only surviving, but thriving in the future. As such, a lot of people are supportive of the idea that this is a stock worth watching so that when prices tumble, you can buy several shares at a discounted price and then wait for them to go back up, thereby allowing you to sell that stock for a significant profit.

Should you spend more than $100 to purchase a single share of Roblox stock right now? The truth is, no one can answer that question for yourself but you. That said, it might be a good idea to watch the stock and then make a purchase when it's more economical to buy several shares. There is a strong belief that the stock will grow by leaps and bounds in the coming years, so choosing to do that could net you a significant payday in three to five years time. For now, it's a stock that's definitely worth watching if nothing else.

Allen Lee

Written by Allen Lee

Allen Lee is a Toronto-based freelance writer who studied business in school but has since turned to other pursuits. He spends more time than is perhaps wise with his eyes fixed on a screen either reading history books, keeping up with international news, or playing the latest releases on the Steam platform, which serve as the subject matter for much of his writing output. Currently, Lee is practicing the smidgen of Chinese that he picked up while visiting the Chinese mainland in hopes of someday being able to read certain historical texts in their original language.

Read more posts by Allen Lee

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