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2021-11-26
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Roblox Is Winning Because Of Developers
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{"i18n":{"language":"zh_CN"},"detailType":1,"isChannel":false,"data":{"magic":2,"id":877800332,"tweetId":"877800332","gmtCreate":1637906554818,"gmtModify":1637906554951,"author":{"id":3579666066637422,"idStr":"3579666066637422","authorId":3579666066637422,"authorIdStr":"3579666066637422","name":"Hodl","avatar":"https://static.tigerbbs.com/d591a82f579d3114da9795812a4217a0","vip":1,"userType":1,"introduction":"","boolIsFan":false,"boolIsHead":false,"crmLevel":3,"crmLevelSwitch":0,"individualDisplayBadges":[],"fanSize":18,"starInvestorFlag":false},"themes":[],"images":[],"coverImages":[],"extraTitle":"","html":"<html><head></head><body><p><span>[Grin] </span><br></p></body></html>","htmlText":"<html><head></head><body><p><span>[Grin] </span><br></p></body></html>","text":"[Grin]","highlighted":1,"essential":1,"paper":1,"likeSize":2,"commentSize":0,"repostSize":0,"favoriteSize":0,"link":"https://laohu8.com/post/877800332","repostId":1183391776,"repostType":4,"repost":{"id":"1183391776","kind":"news","pubTimestamp":1637905190,"share":"https://www.laohu8.com/m/news/1183391776?lang=&edition=full","pubTime":"2021-11-26 13:39","market":"us","language":"en","title":"Roblox Is Winning Because Of Developers","url":"https://stock-news.laohu8.com/highlight/detail?id=1183391776","media":"Seeking Alpha","summary":"Summary\n\nOne of Roblox's most significant advantages is the platform's ability to attract developers","content":"<p><b>Summary</b></p>\n<ul>\n <li>One of Roblox's most significant advantages is the platform's ability to attract developers who create the content and drive revenue growth.</li>\n <li>Roblox is winning over developers for three primary reasons: low barrier of entry, distribution, and monetization.</li>\n <li>However, the stock has rallied recently to a very high EV/Sales multiple due to possibly unsustainable factors.</li>\n</ul>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/f1950ac6b6ca5b5cefb6582909230531\" tg-width=\"1536\" tg-height=\"864\" width=\"100%\" height=\"auto\"><span>niphon/iStock via Getty Images</span></p>\n<p>Roblox (RBLX) is one of the most interesting companies I have come across. As I dug deeper into the business, I gained a deeper appreciation of its sustainable competitive advantages. One of its most significant advantages is the platform ability to attract developers, who create the content and drive revenue growth.</p>\n<p>The company's competitive advantage with developers is the main topic we will explore in this article. In addition, we will discuss RBLX's latest earnings, trading & valuation, and risks so readers can reach their own informed decision on the stock.</p>\n<p>Please refer to my July 2021 article,<i>Roblox: Enter The Matrix</i>, for a broader discussion of Roblox's business and competitive advantages.</p>\n<p><b>Earnings</b></p>\n<p>We will start by quickly going over the company's latest earnings to level-set everyone before moving to the main topic of considering the company's business fundamentals.</p>\n<p>RBLX reported FY Q3 earnings (FY ending Dec) on 11/09/2021, resulting in the stock trading up 42.2% on the day after earnings. The results are one of the biggest rallies of a large-cap stock I have ever witnessed and truly reflects the bear-thesis-busting results.</p>\n<p>Revenue grew 28.6% y/y to $638 million, in-line with consensus estimates. Gross margin came in at 75.0%, while operating margin came in at 13.0% compared to 28.6% a year ago. EPS for the quarter was -$0.13.</p>\n<p>While, on the surface, results do not appear stellar, there was rising skepticism going into earnings. Short interest as a % of outstanding shares increased steadily since the company's IPO to over 9% before earnings. Skeptical investors believed that Roblox will have difficulty growing due to tough COVID shut-down comps when children had nothing better to do than play video games.</p>\n<p>However, the company reported that October bookings were $189 million to $192 million, up 15-16% y/y despite a 3-day outage at the end of the month. In addition, management noted duringthe callthat early November has been consistent with pre-outage trends. This positive update on Q4, in my view, forced many bearish investors to cover their short positions.</p>\n<p><b>The Developer Advantage</b></p>\n<p>Q3 and early Q4 were helped the popularity of Netflix's (NFLX)<i>Squid Games</i>, which developers on the Roblox platform quickly monetized through games of the show. This agility demonstrates the importance of the company's developer community, and the competitive advantages underpinning Roblox's ability to attract them.</p>\n<p>Roblox also knows its fate depends on developers, which is why it has - very successfully - courted them. With 10.5 million developers and 27 million user-generated experiences on the platform, Roblox is winning over developers for three primary reasons: low barrier of entry, distribution, and monetization.</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/2edb1f99056ee184bac0e4d6f0fe1dd4\" tg-width=\"640\" tg-height=\"365\" width=\"100%\" height=\"auto\"><span>Source: November 2021 Roblox Analyst Day</span></p>\n<p><b>Low Barrier Of Entry</b></p>\n<p>You can't get 10.5 million developers on the Roblox platform if it isn't super easy to develop on it.</p>\n<p>Traditional AAA game development is increasingly expensive. On average, it will cost you between $60 million and $80 million to develop and launch an AAA game on the market. Even if you are not aiming for a blockbuster, the traditional game development model can cost millions of dollars to pay for servers, developers, a game engine such as Unreal Engine or Unity, artists, distribution, and more.</p>\n<p>However, anyone can get started as a game developer on Roblox Studios with almost no start-up. Developers can focus on making great games, while Roblox takes care of the rest.</p>\n<p><b>Distribution</b></p>\n<p>Compared to AAA titles, Roblox games are not graphics intensive. Although this seems like a negative, it is a source of <i>competitive advantage</i>. Lower graphic intensity allows for streaming on low-end devices, increasing the ecosystem and creating a more inclusive experience. Nearly everyone could access Roblox games through PC, Mac, Linux, iOS, Android, and Chrome OS.</p>\n<p>The company has a featured games section and has a recommendation engine to get games in front of its massive 47 million daily active users. In addition, developers could pay to advertise their games on Roblox or market through Twitter, Youtube, Tiktok, and other social media platforms.</p>\n<p>Knowing there is a large and ready audience for your game makes game development on Roblox a lot less risky.</p>\n<p><b>Monetization</b></p>\n<p>Developers can make money through <i>Roblox</i> with its Developer Exchange program, or DevEx, which gives developers 25 percent of a game's earnings. 25% is a low payout rate, but the company offers market-leading support and distribution for game developers.</p>\n<p>While most of the 10.5 million developers are not making much of anything, the company paid developers $130 million in the second quarter of 2021. Over 600 developers earn over $85,000 a year from their Roblox creations, and one is close to generating $100 million in annual revenue. Developers are also professionalizing by forming companies and getting venture capital.</p>\n<p><b>Trading & Valuation</b></p>\n<p>RBLX is on fire, driven by better-than-expected results and a market that is intensely interested in the metaverse theme. The stock is trading 52.1% above its 200-day moving average, 12% below its 52-week high of $141.60, and 105% above its 52-week low of $60.50 per share. Short interest is high at 6.7%, however, it has been declining since the company posted Q3 earnings results.</p>\n<p>Since the company is expected to generate losses over the next several years, we will not value the company on a P/E multiple. Instead, we will focus on the forward 12-month EV/Sales multiple, consistent with how we treat other fast-growing, yet-to-be-profitable companies.</p>\n<p>RBLX began trading in March 2021 at 17x EV/Sales, hit a low of 12.8x in October, and is currently trading at 21.7x. At this price, the company is expected to grow sales by 46% in 2021, and by around 20% over the next two years. However, this 20% growth rate strikes me as a conservative estimate given the company's continued strong growth in Q3 despite difficult comps.</p>\n<p>While RBLX trades at a significant discount to Unity's (U) 37x EV/Sales, which I covered in a recent article, Unity is expected to grow around 28% in 2022 and 2023, about 8% points higher than RBLX.</p>\n<p>However, I believe Roblox is a more differentiated platform than Unity, since Roblox's vast ecosystem is without peer and Unity faces a very tough competitor in Epic's Unreal Engine.</p>\n<p>With that said, high valuation and lack of profitability will likely make RBLX too risky for many investors since it is extremely difficult to estimate future earnings for companies at the vanguard of rapid technological innovation.</p>\n<p><b>Risks</b></p>\n<p>The pandemic has been a massive accelerant for the company, but now it faces tough comps and skepticism over its long-term organic growth rate. As the economy reopens, its customers, primary school-aged children, must return to school and may no longer have the time to play 2.6 hours per day on its platform. Although Q3 2021 results were better-than-expected, it was helped by<i>Squid Games</i>, a potentially fleetly benefit. As a result, the company may fail to meet growth expectations.</p>\n<p>To sustain long-term growth, RBLX must hold on to customers as they age. Approximately 80% of the company's DAU are under the age of 25, and the brand is closely associated with child play. The company's ability to appeal to adults remains an open question. However, the company has made notable progress towards addressing this concern:</p>\n<p class=\"t-img-caption\"><img src=\"https://static.tigerbbs.com/07e7c9436ae474a55b98e54e7310e109\" tg-width=\"640\" tg-height=\"323\" width=\"100%\" height=\"auto\"><span>Source: November 2021 Roblox Analyst Day</span></p>\n<p>The company's young user base requires significant investments in safety. The company may face difficulty policing its ecosystem and is at risk of negative headlines. The inability to maintain a safe and trusted ecosystem will likely pressure growth. In addition, as the company becomes viewed more like a social media platform, it could be subject to additional scrutiny.</p>\n<p>Making money off of children who are addicted to gaming may experience social backlash. The accusation that the company is profiting from gaming addiction could lower RBLX's ESG score. Some investors may avoid investing in Roblox due to ethical concerns.</p>\n<p><b>Takeaway</b></p>\n<p>One of Roblox's most significant advantages is the platform's ability to attract developers, who create the content and drive revenue growth. With 10.5 million developers and 27 million user-generated experiences on the platform, Roblox is winning over developers for three primary reasons: low barrier of entry, distribution, and monetization. However, the stock has rallied recently to a very high EV/Sales multiple due to better-than-expected Q3 and early Q4 results and intense market interest on the metaverse theme, both of which may be fleeting tailwinds. As a result, although I have great admiration for the company, I will watch from the sidelines for a better tactic entry point.</p>","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Roblox Is Winning Because Of Developers</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nRoblox Is Winning Because Of Developers\n</h2>\n\n<h4 class=\"meta\">\n\n\n2021-11-26 13:39 GMT+8 <a href=https://seekingalpha.com/article/4471948-robloxs-is-winning-because-of-developers><strong>Seeking Alpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Summary\n\nOne of Roblox's most significant advantages is the platform's ability to attract developers who create the content and drive revenue growth.\nRoblox is winning over developers for three ...</p>\n\n<a href=\"https://seekingalpha.com/article/4471948-robloxs-is-winning-because-of-developers\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"RBLX":"Roblox Corporation"},"source_url":"https://seekingalpha.com/article/4471948-robloxs-is-winning-because-of-developers","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"1183391776","content_text":"Summary\n\nOne of Roblox's most significant advantages is the platform's ability to attract developers who create the content and drive revenue growth.\nRoblox is winning over developers for three primary reasons: low barrier of entry, distribution, and monetization.\nHowever, the stock has rallied recently to a very high EV/Sales multiple due to possibly unsustainable factors.\n\nniphon/iStock via Getty Images\nRoblox (RBLX) is one of the most interesting companies I have come across. As I dug deeper into the business, I gained a deeper appreciation of its sustainable competitive advantages. One of its most significant advantages is the platform ability to attract developers, who create the content and drive revenue growth.\nThe company's competitive advantage with developers is the main topic we will explore in this article. In addition, we will discuss RBLX's latest earnings, trading & valuation, and risks so readers can reach their own informed decision on the stock.\nPlease refer to my July 2021 article,Roblox: Enter The Matrix, for a broader discussion of Roblox's business and competitive advantages.\nEarnings\nWe will start by quickly going over the company's latest earnings to level-set everyone before moving to the main topic of considering the company's business fundamentals.\nRBLX reported FY Q3 earnings (FY ending Dec) on 11/09/2021, resulting in the stock trading up 42.2% on the day after earnings. The results are one of the biggest rallies of a large-cap stock I have ever witnessed and truly reflects the bear-thesis-busting results.\nRevenue grew 28.6% y/y to $638 million, in-line with consensus estimates. Gross margin came in at 75.0%, while operating margin came in at 13.0% compared to 28.6% a year ago. EPS for the quarter was -$0.13.\nWhile, on the surface, results do not appear stellar, there was rising skepticism going into earnings. Short interest as a % of outstanding shares increased steadily since the company's IPO to over 9% before earnings. Skeptical investors believed that Roblox will have difficulty growing due to tough COVID shut-down comps when children had nothing better to do than play video games.\nHowever, the company reported that October bookings were $189 million to $192 million, up 15-16% y/y despite a 3-day outage at the end of the month. In addition, management noted duringthe callthat early November has been consistent with pre-outage trends. This positive update on Q4, in my view, forced many bearish investors to cover their short positions.\nThe Developer Advantage\nQ3 and early Q4 were helped the popularity of Netflix's (NFLX)Squid Games, which developers on the Roblox platform quickly monetized through games of the show. This agility demonstrates the importance of the company's developer community, and the competitive advantages underpinning Roblox's ability to attract them.\nRoblox also knows its fate depends on developers, which is why it has - very successfully - courted them. With 10.5 million developers and 27 million user-generated experiences on the platform, Roblox is winning over developers for three primary reasons: low barrier of entry, distribution, and monetization.\nSource: November 2021 Roblox Analyst Day\nLow Barrier Of Entry\nYou can't get 10.5 million developers on the Roblox platform if it isn't super easy to develop on it.\nTraditional AAA game development is increasingly expensive. On average, it will cost you between $60 million and $80 million to develop and launch an AAA game on the market. Even if you are not aiming for a blockbuster, the traditional game development model can cost millions of dollars to pay for servers, developers, a game engine such as Unreal Engine or Unity, artists, distribution, and more.\nHowever, anyone can get started as a game developer on Roblox Studios with almost no start-up. Developers can focus on making great games, while Roblox takes care of the rest.\nDistribution\nCompared to AAA titles, Roblox games are not graphics intensive. Although this seems like a negative, it is a source of competitive advantage. Lower graphic intensity allows for streaming on low-end devices, increasing the ecosystem and creating a more inclusive experience. Nearly everyone could access Roblox games through PC, Mac, Linux, iOS, Android, and Chrome OS.\nThe company has a featured games section and has a recommendation engine to get games in front of its massive 47 million daily active users. In addition, developers could pay to advertise their games on Roblox or market through Twitter, Youtube, Tiktok, and other social media platforms.\nKnowing there is a large and ready audience for your game makes game development on Roblox a lot less risky.\nMonetization\nDevelopers can make money through Roblox with its Developer Exchange program, or DevEx, which gives developers 25 percent of a game's earnings. 25% is a low payout rate, but the company offers market-leading support and distribution for game developers.\nWhile most of the 10.5 million developers are not making much of anything, the company paid developers $130 million in the second quarter of 2021. Over 600 developers earn over $85,000 a year from their Roblox creations, and one is close to generating $100 million in annual revenue. Developers are also professionalizing by forming companies and getting venture capital.\nTrading & Valuation\nRBLX is on fire, driven by better-than-expected results and a market that is intensely interested in the metaverse theme. The stock is trading 52.1% above its 200-day moving average, 12% below its 52-week high of $141.60, and 105% above its 52-week low of $60.50 per share. Short interest is high at 6.7%, however, it has been declining since the company posted Q3 earnings results.\nSince the company is expected to generate losses over the next several years, we will not value the company on a P/E multiple. Instead, we will focus on the forward 12-month EV/Sales multiple, consistent with how we treat other fast-growing, yet-to-be-profitable companies.\nRBLX began trading in March 2021 at 17x EV/Sales, hit a low of 12.8x in October, and is currently trading at 21.7x. At this price, the company is expected to grow sales by 46% in 2021, and by around 20% over the next two years. However, this 20% growth rate strikes me as a conservative estimate given the company's continued strong growth in Q3 despite difficult comps.\nWhile RBLX trades at a significant discount to Unity's (U) 37x EV/Sales, which I covered in a recent article, Unity is expected to grow around 28% in 2022 and 2023, about 8% points higher than RBLX.\nHowever, I believe Roblox is a more differentiated platform than Unity, since Roblox's vast ecosystem is without peer and Unity faces a very tough competitor in Epic's Unreal Engine.\nWith that said, high valuation and lack of profitability will likely make RBLX too risky for many investors since it is extremely difficult to estimate future earnings for companies at the vanguard of rapid technological innovation.\nRisks\nThe pandemic has been a massive accelerant for the company, but now it faces tough comps and skepticism over its long-term organic growth rate. As the economy reopens, its customers, primary school-aged children, must return to school and may no longer have the time to play 2.6 hours per day on its platform. Although Q3 2021 results were better-than-expected, it was helped bySquid Games, a potentially fleetly benefit. As a result, the company may fail to meet growth expectations.\nTo sustain long-term growth, RBLX must hold on to customers as they age. Approximately 80% of the company's DAU are under the age of 25, and the brand is closely associated with child play. The company's ability to appeal to adults remains an open question. However, the company has made notable progress towards addressing this concern:\nSource: November 2021 Roblox Analyst Day\nThe company's young user base requires significant investments in safety. The company may face difficulty policing its ecosystem and is at risk of negative headlines. The inability to maintain a safe and trusted ecosystem will likely pressure growth. In addition, as the company becomes viewed more like a social media platform, it could be subject to additional scrutiny.\nMaking money off of children who are addicted to gaming may experience social backlash. The accusation that the company is profiting from gaming addiction could lower RBLX's ESG score. Some investors may avoid investing in Roblox due to ethical concerns.\nTakeaway\nOne of Roblox's most significant advantages is the platform's ability to attract developers, who create the content and drive revenue growth. With 10.5 million developers and 27 million user-generated experiences on the platform, Roblox is winning over developers for three primary reasons: low barrier of entry, distribution, and monetization. However, the stock has rallied recently to a very high EV/Sales multiple due to better-than-expected Q3 and early Q4 results and intense market interest on the metaverse theme, both of which may be fleeting tailwinds. As a result, although I have great admiration for the company, I will watch from the sidelines for a better tactic entry point.","news_type":1},"isVote":1,"tweetType":1,"viewCount":377,"commentLimit":10,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"symbols":[],"verified":2,"subType":0,"readableState":1,"langContent":"CN","currentLanguage":"CN","warmUpFlag":false,"orderFlag":false,"shareable":true,"causeOfNotShareable":"","featuresForAnalytics":[],"commentAndTweetFlag":false,"andRepostAutoSelectedFlag":false,"upFlag":false,"length":6,"xxTargetLangEnum":"ZH_CN"},"commentList":[],"isCommentEnd":true,"isTiger":false,"isWeiXinMini":false,"url":"/m/post/877800332"}
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