It is simply a fact that the COVID-19 pandemic changed the world. When it comes to the stock market, "stay-at-home" names such as Zoom (NASDAQ: ZM)Teladoc (NYSE: TDOC), and Netflix (NASDAQ: NFLX) saw their stock prices soar as consumers rode out the pandemic from inside their homes. 

Roblox (RBLX -1.11%), the maker of an online metaverse-style video game, saw its user base grow rapidly as children sought new ways to connect with friends. However, the company's share price came crashing back to Earth over the last year, dropping nearly 70% from its all-time high. So is Roblox down for the count, or is it a screaming buy? Let's have a closer look.

Roblox's business model

Roblox runs an online entertainment platform -- a virtual 3D world. It partners with independent creators who generate experiences that users then explore. For a child of the '80s like myself, it's like having a Nintendo (OTC: NTDOY) console with an endless supply of new (free) games. The downside to the bargain? Some experiences, being independently produced, have bugs or are otherwise underwhelming. Roblox generates revenue by selling Robux -- an in-game currency that gives users access to certain levels, skins, or items. The company then pays its creators about 25% of the Robux redeemed in the game. 

Mixed metrics paint a confusing picture

Roblox reported first-quarter earnings results on May 10. The company's headline results were a disappointment, with a worse-than-expected 27-cent loss (versus analyst estimates of 21 cents) and revenue of $631 million (versus analyst estimates of $645 million). Nevertheless, Roblox stock rallied on the back of the report. In fact, the May 10 low of $21.65 has held as a short-term bottom for the stock. Since the earnings report, Roblox is up more than 66%.

Part of the reason for the rally is that many of Roblox's key metrics remain strong. As of May, daily active users (DAUs) were up 17% year over year; hours engaged were up 10%. Estimated bookings (money spent on in-game currency) were down between 9% to 11% year over year. However, this is a tough comparison since the prior year included inflated figures due to pandemic restrictions. 

Roblox May 2022 Key Metrics
  May 2022 total Year-over-year change
Daily active users (in millions) 50.4 +17%
Hours engaged (in billions) 3.6 +10%
Estimated bookings (in millions) $196-$199 -9% to -11%
Estimated average bookings per DAU $3.89-$3.95 -23% to -24%
Revenue (in millions) $194-$197 +28% to +30%

Source: Roblox investor relations.

Revenue growth continues

Despite the mixed metrics, Roblox still boasts plenty of growth. Revenue grew 39% year over year in the most recent quarter. That's down from the astronomical rate of 140% in early 2021 but still impressive. 

RBLX Revenue (Quarterly YoY Growth) Chart.

RBLX Revenue (Quarterly YOY Growth) data by YCharts.

Is Roblox a buy now?

Ultimately, Roblox looks like the case study for many of the "stay-at-home" growth stocks in the first half of 2022 -- its stock price was pushed down too far, too fast, and now it is stabilizing as Wall Street recognizes its user and revenue growth is not going away. The company continues to add millions of new daily average users, which will keep its revenue engine humming along in the future. What's more, the company's difficult year-over-year comparisons should normalize in the coming months, as the second half of 2021 saw fewer pandemic restrictions that kept kids at home.

Yet, it's important to remember Roblox isn't just a "stay-at-home" stock. As the company's daily active user and hours engaged stats show, it continues to find new audiences for its content. This user base continues to grow older (and have more disposable income) each day. 

Moreover, Roblox is a relatively cheap form of entertainment. With inflation rapidly driving up the costs of other extracurricular activities, Roblox becomes more appealing. For me, the company remains a long-term buy-and-hold stock.