How does the old saying go? Timing is everything? It's advice that informed investors and educated advisors typically dismiss. Trying to time the market is usually a bad idea and often does more harm than good. On the other hand, in some instances it makes good sense to capitalize on what could well be a short-lived opportunity.
Enter Roblox (RBLX 1.35%). This technology stock is down more than 73% from its late-2021 high, with results unable to keep up with the hype up to that point. This steep sell-off is a great buying opportunity for investors who can look more than a few days down the road. The company's business is still accelerating to its full stride now that would-be customers are starting to see its technology's potential.
More than mere video games
On the off-chance you're reading this and are unaware, Roblox's roots are in the online video gaming business. Players can not only virtually compete with and against other players using the Roblox platform but also create their own virtual world in which to play a video game. Gamers can even monetize their own virtual game rooms if they choose to do so.
However, it's not the draw of custom-built virtual gaming worlds that makes Roblox such a compelling investment prospect. As it turns out, the same underlying technology is perfectly suited for the creation of the so-called metaverse.
Don't scoff or roll your eyes just yet. While there's no denying the metaverse (virtual worlds that serve as an engaging substitute for the real world) hasn't yet lived up to its pre-pandemic hype, the movement is gaining traction and users. The Metaverse Consulting Company estimates around 400 million people are now donning their virtual reality goggles and entering the metaverse at least once per month.
Where all these people are going within the metaverse and what they're doing when they get there isn't always clear. What is clear is that plenty of corporations are now seeing enough value in maintaining their own virtual worlds to pay Roblox for access to its platform. Chipotle Mexican Grill, e.l.f. Beauty, Hyundai, and even Gucci are just a few brands engaging consumers -- and prospective customers -- with an immersive metaverse presence hosted by Roblox.
This dual demand is evident in the company's results, too. Last quarter's revenue of $713 million was up 38% year over year, with operating cash growing 68%. Over 70 million users per day entered a virtual world hosted by Roblox during the three-month stretch ending in September, up 20% from year-ago levels. Those numbers not only extend a long-standing streak of such growth but also precede the same pace of top-line growth analysts expect at least through 2025.
The world is (finally) ready for the metaverse
Given its growth initiatives, there's little reason to doubt the company will be able to reach those lofty targets (including its internal goal of 1 billion daily users). For instance, its virtual worlds recently became accessible via Sony's PlayStation video game console and Meta's Quest mixed-reality platform, introducing its offerings to gamers beyond owners of personal computers. More venues are in the works, too.
In the meantime, the company's getting serious about non-gaming applications. Although most of its business to date is still gaming-related, following the success that outfits like Gucci and Chipotle had with their metaverse efforts, Roblox CEO David Baszucki is now eyeing a much wider variety of uses for its tech.
Possibilities include company-wide meetings, sales presentations, educational experiences, concerts, and even virtual dating. That's more in line with the early visions of what the metaverse would eventually become anyway, a means of gathering with other people when a physical gathering just isn't feasible. Connect the dots -- the metaverse concept is finally becoming a Roblox-led reality.
To this end, Precedence Research predicts the annual metaverse market is set to swell from last year's figure of just under $70 billion to $1.3 trillion by 2030. That's an annualized growth rate of 44%. The World Economic Forum's expectations are much more bullish, pegging 2030's metaverse market size at nearly $3.2 trillion at the midpoint of its outlook's range. Either of these scenarios would, of course, be a boon for Roblox.
Just keep in mind why you'd be buying Roblox
The stage may be set for significant long-term growth, but that doesn't mean Roblox will be a particularly easy stock to own between now and then. The company remains in the red and will likely continue losing money for at least the next few years. Investors and analysts alike are sure to question whether it will ever actually be able to achieve viability during this time. That sort of rhetoric can readily work against a stock.
However, if you can stomach that volatility and accept that what you're investing in here is long-term in nature, Roblox stock's eventual upside is clear. That potential is even greater because shares are still so beaten down from their late-2021 peak. Still, it's not exactly the sort of name you want to make an oversize bet on just yet.
