Roblox ($RBLX) stock goes public today with a reference price of $45 per share, which values the company at $29.3 billion. Assuming 40-60% growth into the next couple years, that represents about 25x forward Gross Profit.
For such high Gross Profit growth, this is actually a pretty reasonable multiple, this is cheaper than Snapchat ($SNAP), trading at 36x forward Gross Profit with a similar B2C growth trajectory.
But before buying in, see my concerns below.
From Morning Cents November 20, 2020:
Roblox seems to be inflecting quite a bit, growing daily active users (DAUs) by 81% and revenues by 68% year-to-date in 2020 versus last year. Currently the company only carries a 38% “gross margin” after it pays its game developers. The company is also a long way from profitability because it spends 55% of revenues on infrastructure and R&D.
I really like the fact that it’s a platform where users generate the games, as opposed to a developer itself. It could conceptually be to mobile games what YouTube is for video creators, Substack is for newsletter writers, and Patreon (and Onlyfans) is for “creators.”
My initial concern for the business is what happens to playing time, user spend, and potential gamers once the pandemic is over? I assume social media will be stickier because of its shorter time commitments, but games that require long stretches of time may see usage scale back in a post-pandemic world.