- Roblox (RBLX) stock popped after the company lent its support to Apple (AAPL) in the ongoing dispute between the tech giant and Epic Games over App Store policies
- The stock has been under pressure for the last few months as growth slows for the game creation company
- Deutsche Bank (DB), one of many analysts that previously predicted a bullish verdict for the company, has given its opinion to investors
Roblox (NYSE:RBLX) stock gained handsomely after a key development concerning Apple (NASDAQ:AAPL). The company’s stock price plummeted as markets cooled on growth plays at the start of the year. However, this week brought a welcome change after months of struggles.
The positive momentum is its support for Apple in the ongoing dispute between the tech giant and Epic Games over App Store policies. Roblox is one of the first gaming companies to offer its opinion on the matter.
“Apple’s process for review and approval of apps available on the App Store enhances safety and security, and provides those apps greater legitimacy in the eyes of users,” Roblox said in backing Apple’s policies. Last year, Epic Games accused Apple of violating App Store policies by allowing Roblox users to pick up other games in the app.
Roblox refers to its content as “experiences” rather than “games.” Apple, therefore, argued that one could not treat Roblox content like games.
The development puts the spotlight once again on RBLX stock. It has fallen spectacularly since debuting via a direct listing on March 10, 2021, at $45 per share. On its first trading day, it finished at $69.50, 54% higher than the initial price. At one point, RBLX stock was trading at an all-time high of $141.60 and has fallen 69% since then (which coincides with the wider tech selloff).
RBLX stock is trading at an enviable discount, and it has a unique business model designed to attract someone looking for value.
| RBLX | Roblox Corporation | $43.48 |
Why Is RBLX Stock Down?
Since the start of the year, RBLX has struggled alongside other tech stocks. Due to various factors such as interest rate hikes and inflation, companies with frothy valuations are under fire.
In the case of RBLX, it is facing tough year-on-year comparisons. Recent financials indicate the business is slowing down after usage grew exponentially during the pandemic. For example, year-over-year growth stood at 83% in the fourth quarter. Unfortunately, Q4 was the third consecutive quarter of declining year-over-year growth.
Bookings and hours engaged for the fourth quarter were up 20% and 28%, respectively. Both of these numbers are weak when you compare them to Q1 figures. However, it’s important to note that people are returning to their usual routines. Therefore, they are spending less of their time online.
In addition, the vast majority of Roblox users are children. To expand their user base and make more money in the future, they need to focus on reaching out to adults.
Is Roblox a Buy, Sell or Hold?
During the pandemic, RBLX stock grew tremendously. It is one of the best companies to buy if you want exposure to the metaverse. The emerging metaverse investing theme is a new way of thinking about investing. It is a new way of investing that considers the future and the potential of virtual reality. At current levels, that makes it a buy, especially if you’re into the metaverse’s potential.
Roblox has also collaborated with the videogame industry on special events, partnerships, etc. During its analyst day event, the company detailed its ambitions to expand to different markets, such as education and music.
We are already seeing some action on this end. Nike (NYSE:NKE) is launching an immersive world experience for their customers in the form of Nikeland on Roblox. Players can now customize their avatars in Nike clothing and check out the latest products.
Plus, many analysts have given bullish verdicts on RBLX stock. The most prominent is Deutsche Bank (NYSE:DB). It has a price target of $60, which implies a massive upside from the Friday closing price of $46.02.
Notably, even the bearish calls indicate a substantial upside from the last closing price.
Most of our InvestorPlace writers have also recently given a bullish verdict on the stock. In providing a positive opinion on the company, David Moadel said, “If you’re prepared to take on the risks inherent to emerging technologies, then an investment in Roblox is worthwhile.”
On the publication date, Faizan Farooque 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.
