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Is Roblox (RBLX) A Great Company to Invest In?

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  • RBLX

Jefferies Group, an investment management firm, published its third-quarter 2021 investor letter – a copy of which can be downloaded here. In the letter, the fund talked about the Metaverse and discussed some of the key companies involved in this virtual/augmented reality technology. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.

Jefferies Group, in its Q3 2021 investor letter, mentioned Roblox Corporation (NYSE: RBLX) and discussed its stance on the firm. Roblox Corporation is a San Mateo, California-based gaming company with a $74.5 billion market capitalization. RBLX delivered 53.98% for the past month and it closed at $124.23 per share on November 24, 2021.

Here is what Jefferies Group has to say about Roblox Corporation in its Q3 2021 investor letter:

"If we look at the Metaverse concept with more lenient guidelines for interoperability, then it becomes easier to see why certain companies are being referred to as Metaverse. On the virtual side, we'd point to companies like Epic Games, TakeTwo and Roblox. In augmented reality, it would be Niantic and SNAP. These are the large capitalized players in the space but albeit, not the only ones. We expect new mulit-billion dollar companies will rise as the Metaverse becomes more mature.

Roblox is a good example. The content is almost entirely user generated, the engine that powers the developer studio is provided by Roblox and developers/creators share in almost all the money that users spend on the platform. In addition, many of the items that you purchase in the avatar marketplace, or even a branded experience like Vans World, can be taken across experiences. Roblox talks a lot about platform extension, which would move the platform beyond just gaming/leisure experiences and into education and workplace offerings. The developer community has the capability to build tools for other developers, there are professional studios being built on the platform and many consumer-facing brands/content are partnering with Roblox to ensure a virtual presence. Roblox actually has a lot of the pieces for our utopian definition of Metaverse, but things like technology, interoperability with outside platforms and a dynamic, two-way economy are what's missing. However, given our thesis that full interoperability is somewhat unrealistic, it's easy to see how Roblox fits the definition...

Many already consider RBLX a Metaverse, or at least an early iteration of one, and here's why. The platform offers all the tools required for content creation in a low-code / no code format and handles publication, language translations, billing, collections, safety and security of the environment and more. It's hard to find a platform that makes the creative process easier for developers than Roblox; we see this as very supportive of creator economy.

The content is almost entirely user generated and developers/creators share in almost all the money that users spend on the platform. The developer community has the capability to build tools for other developers, there are professional studios being built on the platform and many consumer-facing brands/content are partnering with Roblox to ensure a virtual presence. Roblox talks a lot about platform extension, which would move the platform beyond just gaming/leisure experiences and into education and workplace offerings. Lastly, many of the items that you purchase in the avatar marketplace, or even a branded experience like Vans World, can be taken across experiences. In essence, the RBLX ecosystem includes creator economy, a virtual platform, picks and shovels of the Metaverse and some interoperability - many of the key enablers for Metaverse.

However, there's always work to be done. We would expect to see a more dynamic economy emerge with resale moving beyond limited items and premium members, particularly with newer gaming models such as play-to-earn. Increasingly, gamers are going to want somereturn for the time and money invested on a platform. Advancements in technology will allow for truly shared experiences among a larger and larger group of people. We remain skeptical on the reality of interoperability; RBLX could very well end up being one of many Metaverses."

Games
Games

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Based on our calculations, Roblox Corporation (NYSE: RBLX) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. RBLX was in 50 hedge fund portfolios at the end of the third quarter of 2021, compared to 49 funds in the previous quarter. Roblox Corporation (NYSE: RBLX) delivered a 37.51% return in the past 3 months.

Disclosure: None. This article is originally published at Insider Monkey.