Just a few months into 2021, we’ve already witnessed a handful of explosive initial public offerings (IPO’s). Among them was the Roblox (NYSE:RBLX) IPO, which generated quick returns for well-timed RBLX stock traders.
However, not everyone simply wants to flip the stock for a quick trade. There might be greater profits to come in Roblox shares for long-term, buy-and-hold investors.
On the other hand, investors will likely want some assurance that Roblox is more than just a platform for kids to play time-consuming games.
So, can Roblox appeal to mature audiences, and in the process mature as a company? That’s the billion-dollar question as Roblox will have to prove itself as a company with staying power.
A Closer Look at the RBLX Stock IPO
RBLX stock debuted on March 10. As it turns out, the Roblox IPO was the very first direct listing of 2021. In a direct listing, the company doesn’t create new stock shares or raise any capital in the process.
Moreover, in a direct listing, the current investors can start selling the already existing shares as soon as trading opens.
Earlier, the New York Stock Exchange has established a reference price of $45 for RBLX stock. However, the shares actually began trading at $64.50 when the general public was able to buy and sell them.
The stock closed on that first day at $69.50. With that, Roblox’s market capitalization increased to $38.26 billion.
RBLX stock will open at around$68. Thus, the stock seems to be settling in at the $70 level after an explosive debut.
A Clear Winner Amid the Pandemic
The onset of the Covid-19 pandemic was definitely a tragic event. In the financial markets, however, the pandemic has created some temporary losers and some winners.
Among the most obvious winners have been video game companies. As schools were closed and sports leagues were shut down, kids were stuck at home and they spent many hours playing video games.
As you might expect, all of this has benefited Roblox. Data from Sensor Tower indicates that during peak months of 2020, the average U.S.-based daily active user was spending 100 minutes per day on the Roblox mobile app.
Probably as a result of this, last year Roblox’s revenues increased by a whopping 82% to $923.9 million.
Michael Guthrie, Roblox’s finance chief, pretty much admitted that the pandemic provided a tailwind to the company’s business last year.
“We headed into 2020 with strong organic growth which was further bolstered by social distancing restrictions,” Guthrie said.
Moreover, the company is modeling rapid revenue growth in 2021. Specifically, Roblox expects its revenues to increase between 56% and 64% this year, to a range of $1.44 billion to $1.52 billion.
Not Only for Kids
Those numbers are certainly impressive. Yet, it would be reassuring to prospective long-term investors if Roblox could shake off its reputation as a platform that’s just for kids.
CFO Mike Guthrie seems to suggest that Roblox is already succeeding in that endeavor.
“We’re increasingly appealing to an older user base,” Guthrie said.
In defense of this declaration, Guthrie pointed out that Roblox’s usage among people aged 13 and above more than doubled in 2020. Furthermore, that age demographic currently accounts for 44% of Roblox’s daily active users.
Perhaps in order to add a sense of maturity to the platform, Roblox has begun hosting virtual concerts.
One of the more notable performances was provided by rapper Lil Nas X. Impressively, his virtual performance on Roblox garnered more than 30 million visits.
The Bottom Line
In time, Roblox should be able to prove to investors that it’s more than a fun diversion for kids.
And with a potentially wider user base, Roblox will hopefully be able to enhance its bottom line in 2021 and beyond.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
