Should You Invest in Roblox?

PHOTO CREDIT: Roblox

OVERVIEW

Roblox Incorporation is a company based in the United States. The company allows other developers to design video games on its platform. The company makes money by allowing these developers to monetize these games through the Robux in-game currency. The company was founded in 2004.

Why You Should?

  1. Roblox is a part of a growing industry. The video game and gaming industries are projected to be hundreds of billions (if not trillions) of dollars in the future. This will cause the company’s revenues and profits will rise as this strong growth happens. This will cause the stock price to rise as well. Roblox is a great future growth play in an investor’s portfolio.
  2. Roblox has some extremely good brand recognition (especially with younger kids and teenagers). In fact, a recent survey showed that around half of kids under 16 played a Roblox game. This strong brand recognition will benefit the company and its investors in the future.
  3. Cathie Wood, the fund manager of Ark Innovation ETF, recently took a stake in Roblox after the company went public on the U.S. stock market. She is one of the best-known names to newer retail investors in the market. Because of her stake, I would not be surprised if other followers will purchase some Roblox stock. This will cause the stock price to rise and will benefit the company and its investors.
  4. The COVID-19 pandemic has further increased the popularity and growth of Roblox games. As people stayed at home, they were able to download and use Roblox games in order to keep themselves entertained during these times. This has benefited the company and its investors.

Why You Should Not?

  1. Roblox faces tough competition in the gaming industry. Some of these competitors include FlowPlay, Mojang, Epic Games, and Unity Technologies. Though these companies do not trade on the stock market, investors should look at these other competitor's products and progress before investing in Roblox.
  2. Roblox recently went public and like other IPOs, the stock price shot up during the first couple of days of trading. I would wait for the stock price to fall and correct before investing in this company. Other issues like share lockup periods and investor’s taking profits might hurt the company’s stock price in the future.

MY OPINION

I think that Roblox is a decent long-term investment due to its position as a good growth play, its strong brand recognition, the Cathie Wood investment, as well as positive impacts from the COVID-19 pandemic. However, tough competition the fact that it recently went public might hurt the company in the future.

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Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.

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Aaditya Patel

Aaditya Patel

Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.

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