Roblox (NYSE:RBLX) is a gaming platform loved by children and teenagers all over the world. It’s also become a big hit with independent game developers. So, when it went public in New York last week, it’s no surprise it was to a roaring reception. It now has a market cap of $38bn and has been added to one of America’s favourite exchange-traded funds (ETFs). Is it a good long-term investment though, and does the Roblox share price have further to climb?
Roblox is described as a digital universe. It’s filled with thousands of games, many made by the gamers who signed up to the platform. The enticing reason for this is that Roblox rewards its creators with a 70% cut of any revenue generated from their games. Some independent users have made million-dollar fortunes from the platform.
Long-term investment opportunity
For many investors, the primary reason they’re attracted to Roblox is its staying power. The company has been around for nearly 17 years. It’s massively popular with youngsters for both playing alone or with their friends in an online environment. The extensive choice of game genres means there’s something for everyone, and word of mouth plays a powerful part in attracting new users.
While the games are free, in-game purchase options bring in the money. While under no obligation to spend, the temptation is there. And many children are choosing to spend their pocket money in this way to enhance their gaming experience.
ARK Invest, a popular US ETF provider founded by Cathie Wood, focuses on tech plays with a long-term vision. Roblox appears to fit the bill, because ARK invested in 519,000 ($36m) Roblox shares at IPO. ARK’s endorsement gives a more bullish case to the company and could entice further retail investment.
Roblox revenue risks
I think there are a few risks to the company’s revenues, and these could lead to volatility in the Roblox share price.
In its early days, the company came under fire for a lack of regulation over its game content. This led to children being exposed to games with less than suitable content. It’s since been attempting to tighten this up, but I think the risk remains. And now that it’s publicly listed, any negative press alarming parents could destructively affect the Roblox share price.
Gaming has had a revenue boost from pandemic lockdowns and Roblox has benefited from this. But there’s a risk that its popularity will slump when the world gets moving again.
Furthermore, I believe Roblox must tighten up its security as high-profile hacking is on the rise.
Would I buy shares in Roblox?
I can see the popularity in Roblox, it has a massive fanbase and a potentially endless market to tap. As children get older and discover the worlds it presents, they naturally want to join. However, the gaming industry is notoriously competitive, and its ongoing success depends on growing its user base and revenue streams.
I think it has the potential to keep advancing, it’s already said it expects Q1 revenue to double. Prior to IPO, Roblox raised over $850m in venture capital funding rounds. So it has a lot of institutional backing. And, having witnessed how children engage with the platform, I think it’s got staying power. Personally, I’m tempted to buy shares in Roblox as a long-term investment.
