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Roblox Stock Corporation operates a platform that allows developers to create virtual worlds and users to live in them.

  • Computer science traces its roots to text-based Multi-User Dungeons from the 1970s. A concept that has existed since the dawn of the computer era.
  • It is becoming more common to think of immersive infinite worlds in software — Slack, for instance, was conceived as a “game infinity.”
  • Roblox’s financials are potent, and its valuation is reasonable considering its growth and margins; we rate it at Buy for the long term.
  • Cestrian Fundamentals, a private investment community I belong to, discussed the idea in more detail with me.

There is nothing new under the sun.

As a publicly-traded company, Roblox Stock Corporation (NYSE: RBLX) has become increasingly popular. This company provides an integrated development environment and runtime for low-tech games; so far, so good. The immersive experience of the world and its internal tokens of value caught our attention, the Robux, named after the game’s creator. The house has an increasing interest in ‘metaverse’ stocks. Because we believe moving into virtual worlds is most likely to be a positive development.

Because it isn’t getting more accessible for people to live in the physical world, and because so many are generating value-tokens in virtual worlds that can be turned into expensive physical items like houses, we think the metaverse will remain and even become more popular. Those who believe this is just Gen Z nonsense would do well to note that Visa just spent $150k. Cyberpunk network for something that used to be called a bitmap image. (Gen Zs, feel free to jump in with comments beginning “grandpa, you have no idea what this is.”).

For more information about RBLX, we recommend that you read several of the stock’s notes already published on Seeking Alpha. It is not uncommon for them to be neutral or negative. Here are all of them. They are all well-argued articles, and this is a stock market. Ergo anything could happen, so who are we to say which one is right.

Our money says it’s a Buy – we’ve bought a little in individual accounts for staff. Despite its recent run-up, this stock is still too new for technical analysis because it’s only a traded instrument in its infancy. According to our assessment, the fundamental valuation is low based on its growth and margins. 

More investments in the Roblox Stock

Over and above our working thesis that people will spend more time in the metaverse and less time in the physical world, the data behind our decision to own RBLX is relatively straightforward – it makes sense. Powerful fundamentals underlie the business.

Because this is a new listing, there are gaps in the information – they will fill in as upcoming SEC reports are there with the missing data.

NOW, what does it matter – 40% free cashflows unlevered at 127% YoY growth and 1.45x total revenue already deferred but prepaid? There aren’t many times like that.

In addition, you will have to pay “only” 35x TTM revenue, which is 88x unlevel pretax-free cash flow over the same period?

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