Shares of Roblox (RBLX 0.94%) are up 36% year to date. They are, however, still more than 60% off their all-time high, set back in 2021.
So, is now the time for investors to buy or sell Roblox stock? Let's look at two reasons to buy now, one reason to sell, and what it all means for Roblox.
First reason to buy: Reinvigorated growth
Roblox is a young company that operates an online metaverse-style gaming platform. As such, it's early in its business life cycle and is focused on growing its user base and revenue.
The company experienced an explosion of popularity during the pandemic, but that led to difficult year-over-year comparisons in 2022 that saw its growth rate cut to almost nothing.
Revenue in millions; year-over-year revenue growth rate in gray. Image source: Roblox Q1 2023 Earnings Presentation.
However, Roblox reported excellent revenue growth in its most recent quarter (for the three months ending on March 30, 2023). Revenue jumped to an all-time high of $655 million, up 22% year over year. That represents Roblox's first acceleration of growth in two years, which is crucial as it demonstrates the company can boost growth even as its user base has grown by leaps and bounds.
Second reason to buy: Improving user metrics
Speaking of users, the second reason to buy Roblox is the growth and maturation of the company's user base. The company reported over 66 million daily active users (DAUs) for the first quarter of 2023, up 22% from a year earlier.
Critically though, Roblox reported improving demographic data on its users. Specifically, it noted that its user base is getting older.
Roblox DAUs by Age. Image source: Roblox Q1 2023 Earnings Presentation.
Roblox's user base has always been young, but now it's trending somewhat older. The share of users over age 13 has grown to 56%. Two years ago, that share of the user base was only 49%.
Investors and analysts cheered this news as it shows the platform is holding its appeal as its core users grow older and their disposable income increases.
One reason to sell: Widening losses
Of course, it's not all rainbows and unicorns for Roblox. Its main problem? Profitability -- or lack thereof.
RBLX EBITDA (Quarterly) data by YCharts.
Quarterly earnings before interest, taxes, depreciation, and amortization (EBITDA) remains negative, and losses have deepened over the last 12 months due to rising expenses. Management cites skyrocketing personnel costs, infrastructure, and trust and safety spending as the root causes.
Is Roblox a buy now?
While Roblox isn't a name for every investor, its soaring fundamentals make it attractive for growth-oriented investors. While the stock tends to be volatile and swings wildly based on user metrics, prospective investors would be wise to buy and hold, particularly if management can show that it can control the company's rising costs.
