A childhood game, Roblox is an online platform and game creation system for users to create, share, and play games, or as the app calls it, “experiences.” Users are able to program, create their own avatars, meet others, and more through the app. Over the last six months, the stock increased around 118.01%, or about 69.12 dollars. The stock rising to almost triple the original price at the start of the year brings up the question: should you buy, hold, or sell RBLX?

According to The Motley Fool however, despite Roblox growing, it isn’t considered a profitable stock. In the past quarter, it has lost around $280 million following a long stretch of operating losses. Roblox is expensive to run: it spends heavily on infrastructure to support the multiplayer capabilities for more than 100 million active users, and due to this the developers’ payout grows, consistently compressing the margins. In fact, DevEx payouts to developers reached a record of $316.4 million, which is up around 52% compared to earlier this year. Bulls believe that with proper advertising and new monetization streams, RBLX has the potential to grow and “deepen its ecosystem”, but until then, there are generally too many assumptions and risks one might have to take when thinking about investing in the stock.

Roblox is delivering some strategic moves and growth strategies in gaining investors’ attention: they have partnerships with Google Ads and also introduced a generative AI system, Cube 3D. AI is one of my most popular growing sectors for the future, so this addition to the game sparks the attention of many. There is potential for a huge growth opportunity, however the company itself will have to be able to execute it well in order for it to be a good win for investors.

RBLX has a somewhat premium valuation, with a price-to-sales (P/S) ratio of 17.2, making it notably higher than Meta Platforms (NASDAQ: META), at 10.7. However, some analysts argue that since Roblox is a smaller company than Meta, there are larger growth prospects than the already well-established company.

The problem with RBLX is that there is a lot of excitement and growth expectations regarding the stock that has already been built into the stock price. Therefore many suggest that buying now might not be the smartest move. Current investors can hold onto their shares, as there aren’t any major red flags suggesting they need to sell it, however new investors should think carefully and examine the long-term outlook before jumping in at today’s price.

Roblox (NYSE: RBLX)