Gaming platform Roblox (RBLX -1.14%) is a story of incredible growth in recent years. It has over 71 million daily active users (DAUs) and about 16 million paying members. Roblox users spent 60 billion hours on the platform last year, and the company has done a fantastic job of monetizing its experiences.
Despite its incredible growth, Roblox may still be in the early chapters of its growth story. Management has big plans for the business and could be a major beneficiary of one of the most promising technology trends on the market right now.
Why might Roblox be a once-in-a-generation opportunity?
Metaverse technology is still in its relative infancy. The global metaverse industry is just beginning to gain serious traction. According to research firm Markets and Markets, the global metaverse market was valued at around $84 billion in 2023 and is expected to grow exponentially to over $1.3 trillion by 2023.
Roblox has a big first-mover advantage. It’s probably the closest thing we have to a true metauniverse gaming experience in the industry today. And as wearable technology evolves and adoption continues to grow, Roblox should receive incredible tailwinds.
Even with its large scale, Roblox continues to grow rapidly. In the fourth quarter, the company’s revenue grew 30% year-over-year, and the margin continues to move in the right direction. Operating cash flow was up 20% for the full year as well, and while the business is still not profitable on a net income basis, a clear path to profitability is beginning to emerge.
Huge long term potential
Management has big goals for the business. While 71.5 million DAUs might sound like a lot, and it is, Roblox leaders believe they can grow the platform to 1 billion in the long term. The platform continues to launch on new devices – for example, Roblox just became available on Sony PlayStation and Meta Quest in the fourth quarter – and this growth could help increase the user base in the near future.
Not only does Roblox plan to grow its user base roughly 14x from its current level, but there are other potential catalysts for top-line and bottom-line growth.
On the one hand, Roblox does an excellent job of finding and implementing new ways to monetize its users. To date, most of Roblox’s revenue comes from the sale of Robux, its virtual currency for in-game purchases, but it has also begun selling advertising on its platform, creating a fast-growing, high-margin revenue stream. The company has just started rolling out video ads and has huge opportunities for immersive advertising as the platform and related technologies evolve. Additionally, Roblox plans to roll out sales opportunities to its content creators physically items through the platform, which could open up a whole new revenue stream.
The bottom row
Roblox has built an excellent growth track record and is beginning to show investors a clear path to profitability. The results so far have been extremely impressive, but we may still only be seeing a small fraction of Roblox’s long-term potential. With the advent of more and more compelling devices from manufacturers from An apple and Meta platformsbtw, both Roblox’s user base and monetization continue to improve, Roblox could be a huge winner.
Of course, there are many things that need to be done in order for Roblox to reach its goal of billions of users and become the dominant experience platform. It is unlikely to be a low volatility or low risk investment. But if the company can execute on its growth strategy, it could be a source of generational wealth for patient investors.
Randy Zuckerberg, former Facebook CMO and spokesperson and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Matt Frankel has positions in Roblox. The Motley Fool has positions and recommends Apple, Meta Platforms and Roblox. The Motley Fool has a disclosure policy.
