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Roblox IPO: 3 Reasons the Gaming Platform Is More Than Just Hype

By Chris Neiger - Updated Mar 7, 2021 at 9:56AM

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Roblox has become a leading gaming platform -- and investors want in.

  • Roblox, an online platform for playing and creating video games, will go public through a direct listing on March 10
  • The platform has attracted a massive following of 32.6 million daily active users
  • Roblox's revenue jumped 82% in 2020 to $924 million, but the company may not be able to sustain its fast-paced growth once the pandemic subsides

Roblox is on the verge of going public, and investors are chomping at the bit to buy the company's stock. That's because Roblox's platform, which allows users to play and create video games, has seen its daily users skyrocket 85% over the past year, sending sales up 82% along with them.

In the video below, we'll take a closer look at three reasons why investors should take Roblox seriously, and one reason why you may want to hold off on buying Roblox shares right when the company goes public.

Narrator: Shares of online gaming platform Roblox will go public on March 10 through a direct listing on the New York Stock Exchange. 

Investors have had their eye on Roblox since it released its first financial information to the public in an S-1 filing back in November, which showed significant revenue expansion, increasing user engagement, and a growing developer community. 

Let's look at three reasons why Roblox can live up to the hype and one reason why investors may want to hold off on buying the company's shares right when the company goes public. 

The video game platform company increased sales 82% in 2020 to $924 million.

And that figure is even more impressive when you consider that in 2018 the company's top line was just $325 million. 

The revenue bump can be attributed to, at least in part, the increase in Roblox's daily paying users, which jumped from 184,000 in 2019 to 490,000 in 2020.

Roblox ended 2020 with 32.6 million daily active users on its platform, up from 17.6 million in 2019. 

But Roblox doesn't just have a lot of people playing games on its platform, these gamers are spending tons of time on the platform as well. Players spent more than 30.6 billion "hours engaged" last year, up 124% from 2019. 

Players won't come to the platform without great games, though, which is why part of Roblox's success comes from its ability to attract developers -- 8 million to be exact -- that create unique experiences on the platform. 

Because Roblox's platform lives or dies based on user-generated content, the amount of active developers the platform has attracted has been critical to the company's success.

Roblox is one of the top gaming platforms in the fast-growing online gaming market, which will be worth an estimated $196 billion by 2022.  

The company has already benefited from this huge market as Roblox's bookings reached $1.9 billion in 2020, up from 171% from 2019. As online gaming continues to grow, Roblox's opportunities should continue to grow along with it.

As promising as Roblox looks right now, it's still unclear how fast Roblox can grow when the pandemic is over. 

The company said in its S-1 filing,

"We do not expect these activity levels to be sustained, and in future periods we expect growth rates for our revenue to decline, and we may not experience any growth in bookings or our user base during periods where we are comparing against COVID-19 impacted periods."

That doesn't mean that Roblox won't be a good long-term investment, but it does mean that Roblox will go public during a time that's uniquely beneficial for the company's business. 

It's usually a good idea to hold off on buying shares of a new publicly traded company until a few quarters have passed. And with Roblox receiving a pandemic-induced financial bump as people spend more time at home, it may be even more important to use caution before buying this company's stock. 

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