Roblox presented a comprehensive plan at Investor Day to expand engagement and monetization through enhanced innovation and execution.
Although the management didn’t bring out anything groundbreaking, we found the presentation fascinating.
However, the strategy still depends not only on execution, but also on the company’s ability to age its users as the user base grows.
We maintain our fair value estimate of $75 per share and view the current price as an attractive entry point.
Roblox revealed that daily active users reached 59.9 million in August, a 24% year-over-year increase, with 4.7 billion hours of engagement, an 18% increase.
Estimated bookings for the month reached $233-237 million, up 5-7% or 9-11% at constant exchange rates, a sequential decline from July.
August marks the third consecutive month of double-digit growth in constant currency after four consecutive months of flat or declining sales, a positive sign that post-coronavirus growth may continue.
While previous investor presentations focused on the potential of the metaverse at Roblox, management kept most of the presentation focused on the uniquely immersive 3D experience Roblox offers its users and creators.
On the day, a number of senior executives showed the fruits of the investments Roblox has made in its development software and infrastructure.
One of the key results of this investment is its focus on further monetizing its platform.
This includes recommending games with a higher revenue percentage than competitors’ games with similar engagement levels.
The company has also rolled out experience guidelines that allow games to be more explicitly tailored to older teens.
Another tool to increase monetization is the addition of immersive in-game ads next year.
Creators control the placement of ads and Roblox delivers the ads in real time, enabling timed or instant ad campaigns and branded ads.
Roblox continues to add more tools and opportunities for creators to earn Robux.
The platform has launched layered clothing in 2022 and plans to roll out user-created facial expressions next year.
Designers will also be able to create limited runs or limited runs of items, creating artificial scarcity and creating higher selling prices, from which they will benefit.
Opportunities for advertisers
While management claimed this would help individual creators, we think it’s more likely that brands like Nike or Gucci to translate these real-world tactics into the virtual world.
In addition to Nike and Gucci, more than 100 brands have partnered with Roblox in the past two years, a number that is likely to grow rapidly, not only because of its legacy user base, but also with the addition of compelling ads.
On the infrastructure side, Roblox continues to invest in building and operating its own network, which now includes two major data centers in the United States, 24 edge data centers around the world, more than 15,600 servers and a bandwidth of 3.1 terabytes per second. .
Management continues to believe that running the Roblox platform on non-public networks provides better performance and stability, resulting in greater engagement.
The higher performance also brings higher quality graphics and a better game engine for creators.
Roblox showed more impressive graphics and game physics coming from the studio side.
However, the quality remains good not only on the new high-end Xbox and PlayStation consoles, but also on the older Nintendo Switch powered by a mobile chip.
While Roblox expects to compete directly with consoles and PCs for the 17-plus, the underlying graphics and physics engines will still need major improvements.
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