Roblox Isn’t Priced for Playing Around

Roblox’s virtual staff meeting celebrated Wednesday that it is going straight to the New York Stock Exchange.

Photo:

Roblox

10. 2021 March 17:22 p.m. Eastern Time

For

Roblox,

RBLX 54.44

The anticipation seems to gladden only the heart of Wall Street.

After Roblox delayed its direct listing in December, it finally took place on Wednesday. At the close of trading, the stock was 54% above the somewhat arbitrary reference price set by the New York Stock Exchange. It is also up nearly 8% from its opening price. The last four major companies tried to register directly at ……

Vulnerability,

Spotify,

Palantir

Asana

– In the first few trading days, the average share price fell 2% from the opening price.

Since then, all three have made significant progress. The slack gets

Sales Department.

For Roblox, the challenge will be to achieve by far the most expensive ranking for a video game publisher. The company’s closing price is about 25 times its average sales forecast for the current year.

Activision Blizzard,

ATVI -1.29%.

Electronic art,

Take-Two Interactive,

TTWO -2.22%.

Zynga

and a new audience

Playtika

Currently, average multiples are almost 6 times higher than expected sales, according to FactSet.

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But Roblox’s unique business model should justify this premium. The company provides a platform for its users to develop and launch their own games and earn revenue by selling Robux, which serve as in-game currency for players. This frees Roblox from the cyclical nature of the video game industry. And lately, investors have been overlooking alternative gaming options in the video game sector.

Unity Software,

which primarily provides tools and services to video game developers, is up 46% since its first day of trading last year and is now valued at 27 times expected revenue.

Roblox has always generated positive free cash flow, even before last year’s pandemic. And the estimate seems a bit more reasonable compared to the company’s balance sheet, which is expected to exceed $2 billion this year, about 40% more than expected revenue.

Perhaps the biggest problem with Roblox is that it doesn’t reach its core target audience; about two-thirds of users are under the age of 14. Respondents to a recent Bernstein Research survey of investors estimated the likelihood that Roblox will achieve similar market penetration among older age groups at 43%. With its current valuation, Roblox can’t afford to sit at the kids’ table.

Email Dan Gallagher at [email protected].

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