Good Monday everyone and welcome to the BCB Cyber Series that takes on the Tech stocks that can provide the cyber-fuel we need to pursue our digital wealth passions.
This week we are jumping in with one of the most exciting growth opportunities based on a gaming environment to arrive since the SIMS or even Second Life back in 2003. The possibilities seem endless.
Starting out the month of April’s analyses with an explosion of opportunity, we are back at it this month with Tech-Growth Companies looking this time at Roblox. As always, we are digging for the cyber fuel we need and that means we need quality growth in the stock. For all these growth stocks we are looking for top-line revenue growth of 20% or more!
Growth of Roblox
Charts from Roblox’s Investor Site blended with a little cyber-fuel.
Roblox, as seen in the chart above, is definitely on the trend line we look for in growth. It simply blows away that 20% indicator we look for in a growth stock investment opportunity.
Before we dive too deep though, as always BCB Cyber loves the deep dive, we strongly advocate that you don’t act solely on anyone’s opinion, even ours! Make sure we are all thinking for ourselves as self-definers and making our own decisions. In the end, the responsibility is on each one of us as individuals. So decide wisely!
Jumping right in now, we do these quick deep dives so we can all get the info we need but also do so in a way that keeps us going in our day. To do this the BCB Cyber way we cover 3 quick pieces of important information. First, we tackle the story to find out who and what the company is, second, we look at the numbers both positive and negative, and finally we discuss our own BCB Cyber position.
This is TS2B, Tech Stock to Buy, hi-tech growth edition, and this week we are going to take on Roblox, the San Mateo, California gaming, entertainment, and multimedia powerhouse changing the way the next generation will work, play, and live.
Roblox is a tale of risk, but also of huge opportunity. We do love that revenue growth! So, let’s wade in and keep a watchful eye.
Where Roblox goes from here will definitely be a story worth following. So far, that story is just getting better.
1 – STORY
Roblox is a story built on people self-defining their own worlds in life, play, and creative energy in a safe place.
For our many children, wholly immersed in this world, they demonstrate the opportunity. They play for hours on end defining characters, immersing themselves in games, and building their own entertainment matrix. Roblox itself is often questioned on this point with regard to whether or not this is safe by many third-party outsiders but found to be diligently working toward these ends with respect to parental controls and safety in communications – chat and the like.
It’s a moment to ponder when your ten-year-old tells you that they are building their own house but the “bills suck!” The world is so engaging, however, that this doesn’t discourage them and they forge forward working to build their own place.
It has even driven many young gamers to turn developer: crafting and designing new elements to build their own cottage industry and means of developing their own digital lives. All this built on a free-standing digital economy and even their own currency Robux. Don’t believe me, just check it out for yourself. Yup, you can even buy ’em at the checkout at Walmart or on Amazon (#CommissionsEarned).
All in all, Roblox is its own complete world. And with the gamer’s turning developer and living and thriving digitally in an all-inclusive environment, the opportunities for a developing return on investment seem pretty incredible. Capturing generations through immersion as children would never work though right? Yeah, just ask Disney! They’ve built an empire on it!
As for the current development of the company, they do seem to be growing in all the right areas but the short-term may be a rocky one. As the world opens up again and people step out into the sun, gaming environments may lose a little luster, though we don’t see them being down for long. Perhaps the best part of their investor story though is that they put their Investor Day on YouTube!
Thanks, Roblox
2 – BY THE NUMBERS
Now for the current numbers on Roblox. BCB Cyber loves to follow five specific metrics: Sales/Revenue Growth, Forward Price to Earnings Ratio, Return on Assets, Operating Margin, and Debt Considerations.
As we’ve seen, Revenue growth is not currently an issue for Roblox. And for analysts, this is definitely a trend they expect to continue.
And better yet, the analysts are pushing the buy side of this attractive grower!
However, the financial metrics that would support heavy, early investment may very well end there.
While Roblox is just starting out, it is an expensive stock. A Forward P/E not yet established and a price to sales of over 40 is certainly pretty hefty, but it does appear to have the wear with all to grow into such a lofty valuation.
Roblox is definitely a high-risk, high reward proposition. With losing operating margins and a strong negative return on assets this digital ecosystem is definitely still struggling to find a profitable footing!
In terms of cash though, Roblox does seem to be navigating the economic storm of the last year pretty well and with a business built to provide an escape to so many, this provides a glimpse of the opportunity to come. Debt appears negligible and less important as the cash situation continues to improve.
Although a good chunk of the newly developed cash flow comes from the new public offering of Roblox, the dramatic near 5x jump in operating cash flow over the last year definitely supports a brighter future!
3 – THE BCB CYBER TAKE
A big thanks to all the work over at Simply Wall Street as they perform great in-depth assessments, but we simply disagree with their current finding. Those analysts see a healthy company but limited opportunity. We see the opposite, in terms of opportunity at least.
With that “flawless balance sheet” and the super healthy industry Roblox finds itself in we see a great deal of opportunity for the future. As gaming grows and continues to not only create entertainment and escape opportunities, so does its ability to create livelihoods. Building worlds that pull in the global youth and provide them the opportunity to build a career as they grow is the next step in human economics!
Our Position & Direction
As of this morning, on 04/12/21, our stake in Roblox sits at a paltry 0.36% of our portfolio with a cost basis of $73.00. As the stock has gone from an asking price IPO at around $45 that quickly shot to near $80, we’ve seen a lot of volatility in this company’s shares. However, we are careful as we invest for the long-term opportunity (5 years or more) and we will work toward bringing down our cost basis to under $70. Ultimately, we begin this position working toward 1% and plan to go as high as 2-3% in our portfolio.
Remember, we are just like the masses, struggling to make ends meet and build our future. So, we start building and keep doing our homework. Adjusting and flexing over time, if we see a massive spike we may lighten our position some, but always with an eye to keeping our portfolio percentage in check.
The same goes in reverse, so if tech takes a nosedive, you can bet we’ll be watching and looking to add. This is just what we need to start us on our journey toward cyberizing our lives.
BCB Cyber believes in the potential for this risky, gaming world innovator and loves the story. However, this is definitely a stock worth buying at the right price and one that BCB Cyber believes to be the right fuel for the fire!
As always, think for yourself, do your own homework, and cyberize your life with the best in disruptive tech. Learn more in our Wealth Section and dive deeper into Establishing the Baseline on BCB Cyber.com!