Is Roblox Stock a Game Bulls Want to Play?

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Not so long ago it was fun and games for the kiddos and some investors alike. I’m talking about Roblox (NYSE:RBLX) and RBLX stock. But today, is RBLX going to make bullish investors’ portfolios happy?

Roblox sign logo at headquarters
Source: Michael Vi / Shutterstock.com

Let’s take a look at Roblox shares off and on the price chart, then offer a well-aligned, risk-adjusted determination based on those findings.

Roblox had the earmarks of the next big thing for consumers of all types. And when shares of the wildly-popular metaverse gaming pioneer debuted a year ago, it certainly wasn’t without merit.

For the younger population, Roblox offered a way to explore a digital world with fewer opportunities for physical interaction with their peers.

It was a hot commodity and for obviously good reason.

On Wall Street, RBLX stock also appeared to be a game-changer worthy of riding to the bank. Well, to some investors at least. As shares made their debut as an initial public offering (IPO), Roblox offered teasingly attractive lures, such as nearly 33 million daily users. And the demographic caught inside Roblox’s metaverse platform was fully engaged, too.

With the young’uns spending roughly 2.6 hours per day on Roblox, the total daily average of all those eyeballs and fingers translated into a fantastical 30.5 million hours. But much of Roblox’s phenomenal usage was the result of a pandemic-driven environment and year-over-year metrics surging from the prior year.

Daily user activity was up 85%. That is no small feat. And that hourly engagement? It was up a massive 125% from 2019!

Then the plug on RBLX stock was really pulled. Not once, but twice.

It turns out, all the dire “new reality” warnings thrown around in year one of the pandemic were already looking questionable by the time RBLX shares debuted.

Thankfully, a much larger population is still engaged on planet earth and not just the Roblox’s metaverse, courtesy of Pfizer (NYSE:PFE), Moderna (NASDAQ:MRNA), Johnson & Johnson (NYSE:JNJ) and other meaningful gamechangers.

As ex-fund manager and CNBC’s Mad Money host James Cramer dutifully warned in the early going of RBLX’s post-IPO show, “This is a great growth story in a market that’s lost most of its appetite for great growth stories.”

Little did he know how right he would ultimately be.

RBLX Stock Weekly Price Chart

Roblox (RBLX) at all-time-lows and no weekly indications a bottom is in yet
Click to Enlarge

From screen time to scream time!

With a weaker growth narrative now that Covid-19 pandemic restrictions are lifting, RBLX stock needs some help.

Unfortunately, it is not finding any support on the weekly price chart. Following Roblox’s most recent bullish failure out of a bear flag pattern, shares are at all-time-lows.

The good news is that RBLX has never been cheaper. Its market cap has plummeted from $73 billion to $24 billion. A nosebleed sales valuation is less so at about 14x price.

Also, given Roblox’s third-party developer model and pay-to-play Robux currency, it still generates huge free cash. Until the fourth quarter of 2021, RBLX stock had delivered five straight quarters of cash flow in excess of $100 million.

Still, with bearish pressure on its more appealing metrics and a name sporting red ink, RBLX stock isn’t at the intersection of growth and value.

If investors think they’re looking at the next big thing in Roblox shares, RBLX needs to prove that point on the price chart first, before an unhedged, long stock purchase is made.

Bottom line, barring a meaningful bottom on the weekly and monthly views, the chance for Roblox to follow in the footsteps of giants like Apple (NASDAQ:AAPL) or Tesla (NASDAQ:TSLA) remains a certain game-over possibility.

On the date of publication, Chris Tyler did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.


Article printed from InvestorPlace Media, https://investorplace.com/2022/03/is-roblox-stock-a-game-bulls-want-to-play/.

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