Roblox (RBLX -0.74%) is an early leader in the metaverse space, but its stock has been crushed in 2022. The company now trades down roughly 64% year to date and 74% from the all-time high that it hit last November, and investors seem split on what's next for the interactive-entertainment platform.

With that in mind, two Motley Fool contributors have outlined bull and bear theses on the stock. Read on to see what they think comes next for the beaten-down metaverse player. 

Roblox's logo.

Image source: Roblox.

The bull case

Keith Noonan: Roblox's service is already incredibly popular, and I think there's a lot to like about the company's core business model. Rather than being a video game company in the traditional sense, Roblox is actually a platform that houses thousands of unique games and experiences.

Creators can make their own games and content for other players to enjoy -- and earn money depending on how much engagement is generated. And the focus on user-generated content sets up the potential for a content ecosystem that can continue evolving over the long term.

Roblox also has a huge social-interaction component, which has helped it grow quickly and generate high levels of engagement. However, the business is now facing headwinds and challenging performance comparisons. 

Its valuation has plummeted as growth stocks have fallen out of favor, and pandemic-related tailwinds that led to surging engagement have waned. Compared to periods of pandemic-elevated performance, the company's bookings are now declining substantially, and daily active users will likely slip on a sequential basis in the second quarter. But I don't think the company is down for the count, and investors could benefit by taking advantage of big sell-offs. 

With the stock trading down precipitously from its high and 46% from market close on the day of its initial public offering, long-term investors willing to accept the potential for near-term volatility can buy into a worthwhile risk-reward profile at current prices.

It's not surprising to see engagement and spending trends looking softer now that people are able to get back out in the world, and the core appeal of the platform doesn't appear to have been damaged. This beaten-down growth stock could be worth betting on. 

The bear case 

Parkev Tatevosian: My bear case against investing in Roblox is the downturn it's seeing related to the pandemic-affected economy reopening. The metaverse pioneer thrived at the pandemic's onset when millions of kids were sent home for remote learning. That created more time for kids, Roblox's most popular customer cohort, to sign in to the platform. 

Daily active users surged from 19.1 million in the fourth quarter of 2019 to 54.1 million in the first quarter of 2022. But the economic reopening has gained momentum and Roblox's daily active users have fallen to 50.4 million as of its latest update. 

The site is free to join and use; Roblox makes money by selling an in-game currency called Robux. In that regard, it also thrived in the initial stages of the pandemic, but the downturn is gaining steam. Bookings, which measure customer deposits to purchase Robux, fell by 10% in May from the same time the year before. Considering user figures, the average booking per daily active user fell by 23.5% year over year.

The indicators point to this trend continuing downward as folks have more options for what to do with their time and money. Increasingly, people are choosing away-from-home activities after social distancing for the better part of two years.

RBLX PS Ratio Chart

RBLX PS ratio. Data by YCharts.

Roblox's stock is not cheap, either, selling at a price-to-sales ratio of 10.4. Paying a premium price for a company that faces stiff headwinds might not be the best recipe for investing success. 

Should you buy Roblox stock?

Even with the dramatic sell-offs, Roblox isn't a low-risk investment at current prices. Now that positive business catalysts stemming from pandemic conditions have waned, there's reasonable skepticism about whether the platform can return to posting big bookings and user growth.

For risk-tolerant investors looking for exposure to the gaming and metaverse markets, Roblox could have big upside at current prices, but the stock probably isn't a great fit for those who want to avoid volatility and speculation.