Despite the hype surrounding it as a massive metaverse play, Roblox (NYSE:RBLX) stock has taken a hammering of late. It appears to have been caught in the market-wide sell-off of tech growth stocks.
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Nevertheless, the metaverse is coming, and a few roadblocks shouldn’t deter investors from going all-in on RBLX stock. Roblox is arguably the most attractive metaverse play with the potential to become an advertising titan in the coming years.
Roblox boasts more than 220 million monthly active users (MAU). It also is the leading gaming platform by revenues, MAUs and downloads.
Roblox is more than just a game. Its ecosystem enables creators to develop games on its creative engine and upload them for users to play on its platform. It’s essentially a 3D universe where users can play games and socialize.
The Metaverse and RBLX stock
The metaverse is set to become a multi-billion dollar industry and Roblox is going all-in to cement its niche. It plans to become an advertising giant in the metaverse and is already gaining traction amongst some of the largest global brands.
Though revenue contributions from advertising and royalties are immaterial at this time, the situation can rapidly change in the future.
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We have seen how sports apparel giant Nike (NYSE:NKE) built NIKELAND on the platform. We also saw companies such as Chipotle (NYSE:CMG), Vans, and Gucci foraying into the metaverse realm with Roblox.
Additionally, some of the biggest music talents (like Lil Nas X, Twenty One Pilots and KSI) brought their performances on the platform.
Roblox is looking to recruit the best talent in advancing its metaverse strategy. According to Daniel Sturman, the company’s chief technical officer, the goal is to become the go-to metaverse company for the best talents across the globe.
Strong Cash Flow Growth
Roblox has been growing its cash flows at a healthy pace over the past few years. It generated a staggering $558 million in free cash flows over the last 12 months.
Cash flows reached an all-time high of $170 million during the third quarter last year. Such numbers are remarkable considering how the company is still in its growth phase.
A lot of it is due to strong growth in the company top-line. Revenues have improved by more than 114% in the past year.
However, net income remains negative, as the company invests heavily in its products and services. All of its expenses are growing significantly slower than its revenues, which suggests that RBLX stock could potentially reach profitability soon.
Roblox’s cash flow numbers point to the strength of the company’s prospects. In addition to creating strong cash flows, the company boasts incredible margins. Its EBITDA and FCF margins are over 20%. These margins are spectacular, considering that its peers aren’t remotely profitable.
Bottom Line on RBLX Stock
Roblox has been growing its business at a breathtaking pace and is likely to continue its fine form for the foreseeable future.
It is arguably the best metaverse-related investment, with multiple companies jumping on the platform to advertise their products.
If it can continue to improve its functionalities and infrastructure, RBLX stock can become a mainstay in the behemoth that could be the metaverse.
On the date of publication, Muslim 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.
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.
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