$RBLX Pre-IPO Analysis

A blockbuster year for IPOs means that retail investors must pick which unicorn to back and sadly, which ones to skip. December alone is host to IPOs such as Doordash, Airbnb and C3 AI. In this analysis I’ll be making the case as to why Roblox is the best unicorn to back, granted their IPO price isn’t too high. 

TL;DR about Roblox: A massive, socially optimized gaming platform that has captured the younger generation with a furor. Roblox is a platform where developers can make infinite “3D digital worlds” and users can build unique, virtual communities tailored to their interest.

In short, for Ready Player One fans and tech futurists, Roblox has built one of the core components in launching a future most agree we are heading toward; The Metaverse

 A collective virtual shared space, created by the convergence of virtually enhanced physical reality and physically persistent virtual space, including the sum of all virtual worlds, augmented reality, and the Internet. The word “metaverse” is a portmanteau of the prefix “meta” (meaning beyond) and “universe”; the term is typically used to describe the concept of a future iteration of the internet, made up of persistent, shared, 3D virtual spaces linked into a perceived virtual universe.

— Wikipedia

The creation of the metaverse is no small feat and won’t be embraced within the next 3-5 years. For a company to capitalize on such a market they will need a dedicated fan base and a war chest of capital to invest. If Roblox has a successful IPO they will be one of the few companies in the world, besides Facebook, that is in a position to start building a metaverse future. Below are the highlights that give me great confidence that Roblox, if priced well at IPO, will be one of the best gaming stock investments of the decade:

• Demographic — More than half of Roblox’s 31 million users are under the age of 13. An influential time in human development that will make an entire generation more adoptive of 3D & VR technologies and how to interact within them. Current plans are to build content to grow with their users, a strategy ignored by Nintendo that cost them dearly. Also, figures show that the 17-24 year old age group is growing even faster than the core under 13 base, indicating Roblox’s strategy of targeting older age brackets is working.
• Growth — Roblox has seen explosive growth that snowballed even faster thanks to the COVID-19 pandemic. Over the last 12 months, daily users have surged 82% with the average time spent per user being a whopping 2 hours, 30 minutes PER DAY. Year over year growth demonstrates that Roblox’s popularity isn’t just a pandemic fad with 2019 putting up over 13.7 billion hour spent by users on the platform.
• Application — Right now Roblox is content with focusing on the gaming aspects of their platform but how long until we see other applications? If Roblox can be used to make complex games with social integrations, why not classrooms? Office spaces? With a totally customizable environment, the possibilities are endless. Roblox made it clear they are expanding beyond gaming when it booked Lil Nas X for a virtual concert that was attended by 33 million people making it the largest concert of all time.
• Reinvesting Revenue Strategy — A major growth limitation around VR and virtual environments is the price point of entry. Roblox has been reinvesting their revenue into developing more optimized systems that will allow the sector to be more accessible for the general public. This is a big indication that they are investing in building the future and not focused on putting millions of profit into c-suite exec pockets. 

With everything that Roblox has going on, I am extremely excited for their IPO and only hope they don’t price themselves too high to alienate their most passionate investor base. Granted the price is moderate I am recommending to buy and long hold.