Roblox Corp (NYSE: RBLX) is taking a big hit today after reporting a sequential “decline” in the one metric that matters the most to its investors – average daily active users.
The video game platform ended its fourth financial quarter with 85.3 million DAUs, down from 88.9 million in Q3.
Investors are punishing RBLX this morning also because its bookings guidance failed to impress.
Nonetheless, there may be reason to believe that a 20% crash in Roblox stock following its earnings release on Thursday may have helped de-risk it for those interested in scooping up shares at current levels.
Roblox is still growing fast
Investors could take heart in the fact that Roblox is still growing – and that too pretty quickly on a year-over-year basis.
Its bookings may have failed to meet analysts’ estimates in Q4, but they were still up 21% versus last year, which is quite impressive considering RBLX is not really in its early innings anymore.
As companies get bigger, the rate of their growth tends to slow down. But that’s not happening with Roblox so far.
To put that into perspective, one of the most renowned companies in the world, Apple Inc., grew its revenue by about 3% only in 2024.
Compare that to a 21% growth at Roblox and suddenly it doesn’t look all that bad.
Even after losing users in its recently concluded quarter, the company still has about 19% more users on its platform than a year ago.
It’s a revelation that is perhaps hitting investors a little late today – considering Roblox stock opened some 20% down on Thursday but has already rallied more than 10% since then.
Roblox has a big enough TAM
The fact that Roblox is still growing in high-teens percentages suggests the metaverse trend remains unharmed.
Its shares are attractive to own following a sell-off like today’s as the company has the early mover’s advantage in the metaverse that Statista forecasts will grow at a compound annualized rate of 37% through the end of this decade.
So, if RBLX succeeds in unlocking new use cases like advertising or education, it stands to benefit rather significantly as a key player fighting for a sliver of that TAM.
Even from a technical perspective, Roblox stock remains appealing considering the crash this morning failed to push it below its 100-day MA, suggesting the bulls are still in control.
Are RBLX shares worth owning?
All in all, an issue with Roblox stock was its premium valuation and fly-high expectations – both of which have been somewhat alleviated following the sell-off on Thursday.
Is Roblox stock still a high-risk investment? You bet. But it has the potential to emerge as a sufficiently rewarding investment in the long run as well.
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