1 Growth Stock Down 72% to Buy Right Now

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    Are you willing to take a little extra risk for a big growth opportunity? This is a common trade-off when picking stocks. If the answer is yes, consider entering the video game industry. roblox (RBLX -3.47%).

    Roblox isn't profitable yet, but continued double-digit revenue growth is pushing profits in that direction. And even before it turns profitable, the stock could start doing well again. Even better, the stock is down 70% from its all-time high. This discount will quickly begin to shrink and may never be available again.

    Roblox isn't exactly a game

    You've probably heard of the company as well. However, unless you're a video gamer, you may not fully understand what it is or what it does.

    Roblox isn't a video game per se, and it doesn't even have a game developer (although it does have staff who do). Rather, Roblox provides a platform where you can play in virtual game rooms created (mostly) by other video gamers. Some features are free to use. Others require payment. On the other hand, Roblox shares a portion of its revenue with online game creators. Last year, the company distributed over $740 million of his $740 million to his 12,000 different game developers (though, as you might expect, these payments weren't evenly distributed. The best of the best collected most of the money).

    It is also one of the few multiplayer online gaming platforms that continues to be of interest to gamers. This is likely because developers have an incentive to keep the experiences they offer competitive. Last quarter, his average daily user count was up 22% year over year to his 71.5 million players. Clearly, Roblox is doing something right.

    However, this is only half the story. While its gameplay looks as if it can stay relevant indefinitely, the company has another growth engine turning. It's the Metaverse market.

    The Metaverse is finally getting some attention

    It's safe to say that the Metaverse movement has fallen short of the hype that was palpable just a few years ago. Most consumers still don't understand it, nor will they. For the few interested people, the cost of the equipment required to fully immerse themselves in a persistent 3D virtual world can be prohibitive. meta platform's (NASDAQ:Meta) Quest goggles start at $250 and must be connected to a high-performance smartphone or PC for more intensive use.

    This is why, among the wide range of estimates for the total number of regular Metaverse users worldwide, none put the number above hundreds of millions, and most of them are children and teenagers who play games like . Mine Craft, fortniteand a select few users on Roblox using computers and mobile devices.

    To be clear, this is monthly users, not daily users.

    Of course, this is the main reason why many software, game, and app developers are no longer prioritizing the Metaverse. Why invest time, money, and other resources in pursuit of a relatively small opportunity?

    But what happens when consumers, content developers, distributors, and necessary underlying technology providers are all finally on the same page?

    According to a report from market research service Spherical Insights, this could very well be the case. This suggests that the global Metaverse market will grow at an annual rate of 45% until 2030. This view closely mirrors the expectations of Polaris Market Research and Precedence Research.

    Great, but what does this have to do with Roblox?

    As it turns out, the same technology that makes Roblox such a great virtual video game platform is also suitable for creating virtual worlds for other purposes. NikeFor example, it relies on Roblox technology to host its promotion-oriented digital universe. His beauty company Fenty also uses his Roblox platform to engage with consumers. In that room, guests can custom create their own virtual Fenty Beauty Gloss manufacturer hyundai also offers virtual test drives of select new vehicles. And this is just a sample. Other brands are also leveraging Roblox's virtual reality technology to create their own Metaverse spaces. This is quickly becoming the preferred platform for brands looking to enter the metaverse fray.

    Roblox stock isn't for everyone, but small stakes may be right for you

    It's not the right stock for every investor's portfolio, and it's certainly not a “bet on the farm” stock. Whose Portfolio… no matter how high your risk tolerance is. The company remains in the red and is expected to remain in the red for years to come, even though sales are expected to continue to grow well. This dynamic can make even blue-chip stocks highly volatile.

    Conversely, stocks of unprofitable companies can often still perform well simply because the company is making progress toward bottom line profits. Roblox stock has been this kind of stock in the past, and it's certainly possible that it will be that kind of stock again in the foreseeable future.

    Despite the company's past and expected losses, the analyst community remains bullish on Roblox stock in the short term. Most analysts covering the stock rate it a Strong Buy, and the 12-month consensus price target of $49.46 is more than 20% above the current price. Sure, you can take crazier risks than you can add to your portfolio.

    Randi Zuckerberg is a former head of market development and spokesperson at Facebook, sister of Meta Platforms CEO Mark Zuckerberg, and a member of the Motley Fool's board of directors. James Brumley has no position in any stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms, Nike, and Roblox. The Motley Fool recommends the following options: His January 2025 $47.50 long call against Nike. The Motley Fool has a disclosure policy.


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