Roblox (RBLX 1.35%) is a growing gaming company that makes it easy for its users to create new experiences. With tons of content and games, and appeal with young kids, Roblox is a stock that investors should keep a close eye on. While it isn't profitable today, there's plenty of reasons to remain bullish on its long-term prospects.
Here are three growth catalysts that could pave the way for some fantastic results for Roblox in the future.
Roblox is coming to the PS4/PS5
In September, Roblox announced that its experiences will be available on Sony Playstation consoles as early as next month. That's a big development for the company since there are over 100 million active users on the Playstation Network. Roblox is currently available on Microsoft's Xbox One, but by becoming available on more consoles, it can reach significantly more users than it does through computers and smartphones.
Roblox does, however, continue to benefit from strong user growth. Last quarter, for the period ending June 30, its average daily active users totaled 65.5 million -- an increase of 25% year over year. And the number of monthly unique payers grew by 19% to 13.5 million. To ensure its continued growth, it's imperative for the platform to be available on as many devices as possible.
There will be more content aimed at older kids
Roblox is a platform that is predominately aimed at younger kids. It's a less complex virtual world than Minecraft, and Roblox users may eventually transition to Minecraft over time. But the lines are also becoming increasingly blurred -- there are Minecraft-like experiences available on Roblox, so there's possibility for an overlap there.
That's why another important step that Roblox is taking is focusing on older audiences. In June, Roblox announced that it would allow creators to make content available for users 17 and older. Users will need to verify their age, but it could lead to more user growth in this area.
According to Roblox, 38% of its daily active users are at least 17. And tapping into an older demographic, one that has much more disposable income, can provide yet another growth catalyst for the business.
The partner program could be its real money maker
Roblox makes the bulk of its revenue by having users pay for Robux, the platform's currency, to buy in-game features or avatar upgrades. But in the future, that is likely to change more toward advertising. The company announced a new partner program, also in June, that it says will "enable a self-serve, global advertising ecosystem on the platform."
Placing ads within Roblox experiences can be an effective way for advertisers to reach younger audiences. It can result in the creation of the type of metaverse that excited investors back in 2021 when Meta Platforms generated tons of hype in its plans for a digital world.
Already with tens of millions of daily active users, Roblox is in a much better position to capitalize on this. It's something that over time could be a huge growth catalyst for the company, particularly as it focuses more on older age groups, both by allowing more mature content and by being available on consoles that are popular with older kids.
Collectively, all of these developments could set Roblox up for some strong growth for years to come, and potentially lead to profitability -- the company has incurred a $1.1 billion loss over the trailing 12 months.
Should you invest in Roblox?
Roblox is one of the growth stocks I'm closely watching because with its dropping valuation and some exciting opportunities ahead in its future, this can make for a great long-term investment. Down 11% this year and trading near its 52-week low, this could be a sleeper pick.
While it may be a long road to profitability, Roblox does appear to be on the right track. Its losses are getting smaller, the business will reach more users, and its growth rate remains strong.
If you're willing to be patient and buy and hold the stock, Roblox could make for a great buy right now. It looks to have all the tools necessary for sustainable growth over the long haul.
