Risk/Reward Rating: Neutral
Roblox is arguably the most exciting growth story told in the markets today as a pure play on the hottest trend, the metaverse. The company describes itself as operating a human co-experience platform where users interact with each other to explore and develop immersive, user-generated, 3D experiences. Adding to the metaverse excitement is the addition of a virtual currency called the Robux, which users purchase in order to build their virtual lives and conduct commerce in Roblox’s virtual worlds.
The company has seen explosive growth as witnessed in its Q2 2021 earnings report last evening. Revenue increased 127% over Q2 2020 to $454 million, while free cash flow from operations grew 70% to $168 million in the quarter. The impressive results were no surprise given the excitement and lofty expectations surrounding the company. Given the lack of surprise, the stock had a muted reaction to the excellent results and was down 1% midafternoon on the news. Prior to this muted stock reaction today, the shares briefly sold off 5% in after-hours trading immediately following the earnings release. This volatility was a reaction to developments in Q2 which point toward greater caution going forward.
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