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Roblox (NYSE:RBLX), the game platform often described as a “metaverse” stock, has lost 66% of its value in 2022.
But as with the half-off sale that still has you paying money for something, it’s still not cheap. At its June 29 opening price of $34.50, Roblox’ market cap was $20 billion, against 2021 sales of less than $2 billion.
Those sales were double 2020’s total. That might be worth buying if there were profits to be had. But there aren’t. Roblox’ losses came to 97 cents/share last year, double 2020’s 48 cents. It likely won’t make a profit in 2022, either. Yet only two of 17 analysts following Roblox are telling clients to sell the stock.
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Why is Roblox still worth 10 times sales? The Children.
| Ticker | Company | Price |
| Roblox | $34.00 |
RBLX Stock: Hold on Tweens
Rocky and Bullwinkle are dead, grandpa. Half of America’s kids today are on Roblox, which is less a game than a game creation platform. Youth-oriented musicians are being pushed to play concerts on the platform as kids spend real money to increase engagement with their favorite artists. Instead of buying the CD, kids are buying online merchandise.
It’s these kids who are driving today’s metaverse market, which Meta Platforms (NASDAQ:META) has bet its future on. Successful marketers like Nike (NYSE:NKE) are rushing in, creating virtual, product-themed worlds.
The risk is that in trying to cash-in on its popularity, Roblox has become “the man.” It’s accused of exploiting children in the developing world and of ripping off people in the developed one. This journalism is under the radar because it’s produced for Alphabet’s (NASDAQ:GOOGL) YouTube. But, as with the metaverse, there’s a real audience for it.
Defending the Stock
Roblox’ growth has slowed as the pandemic has ebbed. The question for investors is whether the last quarter’s problems were a blip or a trend.
Roblox bulls insist that the best is yet to come. They insist that Roblox is the right way to play the metaverse, before the kids and their technology grow up. They see Roblox evolving into a social network, a 2020s’ version of Facebook, with sponsored listings of games and in-game marketing opportunities.
Bears, like Goldman Sachs (NYSE:GS), have downgraded the stock. They’re worried it won’t make revenue estimates for its second quarter. Sales of $650 million are expected, up from $538 million in the first quarter. Roblox next reports August 9.