In the last month, Roblox (RBLX), a mobile gaming firm for children, nearly doubled in value. The stock
has poor valuation, mediocre growth, and is unprofitable. Markets speculated on RBLX stock because
Nasdaq rebounded.
Roblox is among the meme stock trades. The speculation starts with a JPG image and some bullish text
justifying its upside. GameStop (GME) is the most popular meme trade. The company maximized the
bullish momentum by announcing a stock split. A day later, it said it would lay off staff.
In the real world, an economic slowdown will hurt the gaming market. Roblox’s customer base will
spend less. Parents will cancel the credit card link on their children’s accounts. This will delay Roblox’s
path to profitability.
Speculators also classify Roblox as a metaverse play. Meta Platforms (META) is the only real meta
investment. This will take at least 10 years to play out. Meta must spend billions annually to build the
platform and the devices. Meta, previously known as Facebook, faces severe challenges. Oculus
headsets only cost $300. But in an economic slowdown, people must eat and pay more for gas. They will
not spend a cent in a virtual world.
Roblox’s rally is questionable. Be wary.