For all virtual sandbox creators
Speaking of it becoming more than just a video game platform, a Jefferies analyst isn’t quite convinced about the company’s long-term potential.
Andrew Uerkwitz began reporting on Roblox (ticker: RBLX) on Thursday. He rates the stock on Hold, with a price target of $92, while the stock closed 5.1% Thursday at $85.75, nearly double its share price of $45 earlier this year.
For what is essentially a single title video game company, Roblox delivers big numbers. It generated a second quarter loss of $140.1 million on net bookings of $665.5 million. In the same quarter, it had more than 40 million daily active users, most of them younger players. It has made user-generated content a big business, which it has steadily built up since its inception in 2004.
Those 40 million users are loyal, including both video game players and developers who create and monetize their creations within the environment built by the company. Uerkwitz said Roblox is well positioned to take advantage of video game trends that involve social experiences — this is the metaverse kind of stuff Silicon Valley talks about — and casual games that don’t require a large investment from players.
Still, he has questions about the future.
First, the company’s ability to attract older players — most of Roblox’s current players are teens and children — is an open question. Uerkwitz said there have been few brands that have achieved this feat in the past, and those that have have been acquired. Examples include:
(DIS) buys Marvel and Lucasfilm.
Uerkwitz also questions the company’s ability to expand into China, especially since regulators there seem to focus on the amount of time children play video games.
Finally, Roblox made a bet on the metaverse, hosting live virtual events such as concerts, museums, book signings, fashion shows and other social activities. It called “metaverse” more than one dozens of times in its prospectus. While the efforts in this area are interesting, the company’s main use still revolves around something closer to video games. Uerkwitz said that won’t change anytime soon.
“If we had to name it, we’d call it an experience platform,” the analyst said.
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