hey guys how's it going Andy from Magoo investing happy Thursday! Today we're going to be talking
about one of the most anticipated public offerings of a company so far in 2021 so today we're going
to be talking about Roblox Stock (RBLX Stock) ticker symbol $RBLX there's a company that I did
not know a lot about but seeing the excitement around this this public offering the fact that
it was up 54% in its first day and reached a market cap of 38 billion dollars I thought this
was a company that I should talk about seeing the market cap of 38 billion dollars makes it higher
than other video game companies like electronic arts stock (EA Stock) ticker symbol $EA and Take
Two Interactive Stock (TTWO Stock) with ticker symbol $TTWO in addition Cathie wood from the ARK
etfs came out and said that she bought shares for the internet etf that they have which is $ARKW so
whenever you have someone like Cathie wood on your side I think it's worth talking about why she
thinks this company is so impressive going forward so what is this company and why are people so
excited about it because I’m 24 I’m not a boomer but this is not a company that I’ve heard of so
I spent a lot of time this morning researching it I know this is the third time that I’ve tried
to record this because the video has failed so I’d really appreciate it hit that like and
subscribe button because this has been a pain to record so as always this video is going to
be broken down into three parts I’m going to be talking about first what the company
is their target demographic and some impressive numbers that have come out from their sec filings
and some of just the reports that I’ve been seeing from news stations about the company
part two we're going to be talking about the financials of the company I’m going to
be diving deep into the sec filings and talking about some of the important numbers that I think
you should know to have a good understanding of how the company works overall and then part
three I’m going to give my overall thoughts on Roblox Stock (RBLX Stock) Ticker symbol $RBLX
for a long-term investment I’m going to give it a ranking one out of ten to kind of tell you how
I feel about the company long term because I think it's important to say that when I talk about these
companies if this is a company that you love and I don't say a lot of positive things about it
let me know in the comment section down below what you think I’ve missed because I am not
perfect obviously I make a lot of mistakes I’m not an expert at this I just do probably more research
than most people on these topics and I put my opinion online so I’m very curious to see what you
guys have to say about Roblox Stock (RBLX Stock) and especially if you bought in I want to hear why
also before hopping into the video General Electric stock has fallen further it was down
like eight percent so far today and I made a video yesterday talking about the investor day and the
reason why I was down yesterday and explained why I bought shares yesterday and the stock's
down significantly today and I did buy more shares so if you want to hear my full explanation of what
happened and why the stock is falling and why I’m still bullish on that company overall I’ll
link that above right now so what is Roblox Stock (RBLX Stock)? Roblox Stock (RBLX Stock) is a video
game app that's focused mainly on the younger demographic and it is massive I always knew
that it was pretty large but as of June it had been downloaded 383 million times on the google
play store and iOS so that's a lot of people and that's resulted in them having 150 million
monthly active users I know that's a really large number but I want to put that in perspective to
another massive video game company with Minecraft and the numbers I could find Minecraft currently
is 131 million monthly active users so Roblox Stock (RBLX Stock) is larger than that which is
pretty impressive to think about looking at their demographics 67 percent of their users are under
the age of 16. so this is targeting really the younger demographic it makes sense why someone
like myself who is 24 really has never heard of this app before and I don't actually know anyone
that plays this video game so even with that younger demographic the average user spends 14
on the platform and that's a metric that's really important to look at because
that's usually the negative thing about working with younger people is that they don't have their
own money and so we have seen some examples of some apps that have done incredibly well
uh targeting the younger demographics and allowing them to spend their parents money
and so we have been seeing that you know it's been downloaded 383 million times and the average
person spends fourteen dollars in the platform that results in a lot of revenue put that together
with huge monthly user growth from 80 million people in 2018 all the way up to 150 million
in 2020 you see some impressive numbers you get a company that went from quarterly revenue of 60
million dollars in quarter one of 2018 all the way up to 242 million dollars in quarter three
of 2020. and the question I always ask when I find these new companies is how do they make
money the way they do that is they have their in-game currency called robux and these are
used to buy additional content on the platform and one of the really interesting things is
Roblox Stock (RBLX Stock) doesn't really make a lot of their own content they have the interface
and the infrastructure to allow people to build content and so they have financial incentives for
these really creative people to come in and create these different worlds and different
stories on the platform and instead of just paying them a flat fee for making their own stuff 70%
of the money that is spent on these servers are given out to the content creators and so
that was a much higher number than I was kind of expecting especially when you look on YouTube
I think the revenue share is like 40% for the user and so it's seen 70 percent for a company
that has seen explosive growth in the past couple years I was pretty impressed by that and that has
resulted in the company expecting to pay out 250 million dollars to its content creators this year
they also have incentives for the paid premium subscribers uh for how much time they spend on the
individual world so there's a lot of incentives for people to create really impressive worlds and
experiences instead of the risk of having these people go off and creating their own games
they're giving them the financial incentives of 70 of their revenue to stay on the platform and
create content for Roblox Stock (RBLX Stock) and they also show a breakdown of how much
people are making by creating these type of content there's 250 people that made between %100
000 and %1 million 29 people that made between %1 million and %10 million and there were three
people that made over 10 million dollars creating content for Roblox Stock (RBLX Stock) that's crazy
to think about I was talking with my roommate about the potential of any of my friend group
making more than 10 million dollars in their career and we thought probably not and the
fact that people are creating content for a kid's game who made 10 million dollars from it
is crazy they've also had some in-game events that have given a lot of publicity the platform
they had lil nas x that was attended by 33 million people and I wanted to see how that compared to
the Travis Scott Fortnite concert that happened this past summer and the numbers I could find
there were 12 million people that saw the Travis Scott Fortnite concert that's almost three times
more for the lil nas concert that was on Roblox Stock (RBLX Stock) that's pretty impressive but
now I’ve talked about what Roblox Stock (RBLX Stock) kind of is I want to talk about some of
the numbers behind the company because for someone like myself that doesn't use the
platform I think looking at the numbers and trying to see the trajectory of the company
is really important to determine if a company is worth buying in for a long-term investment so
Roblox Stock (RBLX Stock) has spiked in popularity and evaluation during the pandemic a lot of kids
have been limited in the ways that they can have social interaction and a lot of people
have been moving towards video games and we've seen that with Roblox stock (RBLX Stock) going
from a valuation of four billion dollars at the beginning of the pandemic it's now evaluation up
at 38 billion after they went public yesterday they've also seen some very impressive growth
through their normal metrics a monthly users have almost doubled in the past two years revenue has
increased by four times since quarter one of 2018 but this is a company that posted a massive loss
in 2020. in the first nine months of 2020 the company posted a net loss of almost 200 million
dollars compared to a loss of 38 million during the same period of 2019. this is a graphic that
I found from your sec filing that has a lot of information on it and I wanted to highlight some
of the areas that I thought were the most important so from this their annual revenue
for 2020 was 923 million dollars which is very impressive but they did have a loss from their
operations of 1.2 billion dollars that resulted in a net loss of 257 million dollars in 2020.
it's almost four times larger than it was in 2019 so where are these costs coming from
as I mentioned they are paying out a lot of money to their content creators 240 million dollars in
developer exchanges is one of the areas that really jumped out to me these exchange fees as
I mentioned are paid out to their developers for creating content on the platform but
another very important area is that the 30 feet that they're paying towards apple and google to
be able to have transactions go through on their interfaces so let's talk about part three where I
get my thoughts on Roblox Stock (RBLX Stock) stock ticker symbol $RBLX for a long-term investment
overall they've seen some very impressive growth and I love the idea of incentivizing their users
to create content for the platform when you have this type of community that's centered around
building additional content for your platform it really limits the lulls that we see with some of
these major video game creators where you have some time in between creating these major game
releases where there's kind of some periods where there's not a lot going on and having the constant
refreshing of all these people trying to take advantage of the 70% revenue share that they
have it really allows the company to have fresh content constantly and so I really like that also
another benefit that I saw is that they did not go through the traditional IPO method and one of
the problems that I have with IPOs this week is that you have the share lock up period this is
usually around 180 days after they go public where the insiders that were given shares as part of
being involved with the company before it went public are not allowed to sell their shares and
when this happens when the share lock up period ends usually you see insider selling because
they've made a lot of money from this the share offering and so they want to be able to sell to
pocket some of the money and they don't want to have the full exposure to this company especially
if the stock price has gone up significantly since it went public but Roblox Stock (RBLX Stock) did
something different they went through a direct offering which one of the benefits is that you
don't have the share lock-up period we've seen a lot of companies go through this method recently
specifically Palantir Stock (PLTR Stock) ticker symbol $PLTR that I made a video about a couple
days ago however Palantir Stock (PLTR Stock) did have a share lock-up period which really
confused me but we're not talking about that we're talking about roadblocks so this does have
the benefit if they don't have the share lock-up period so I would feel more comfortable buying
into Roblox Stock (RBLX Stock) pretty soon after it goes public instead of waiting for that share
lock-up period to end they also have made a deal with TenCent to expand to the Chinese market and
whenever I talk about these companies that have done extremely well during the pandemic I ask
is this type of growth sustainable and I think this growth into china allows them to continue
to expand rapidly even if their user base in the us kind of shrinks after the pandemic finally ends
but being able to expand to the Chinese user base a lot of growth potential there obviously
but let's talk about some of the concerns that I have am I worried about the
widening net loss not really you have a lot of these tech stocks that go public and they're
not operating at a profit it's become pretty common for these companies to not expect to go
profitable for like five to ten years so I’m not super worried about that right now a couple years
from now we'll look back at it and I’ll maybe change my tune whoever right now not worried about
the widening net loss the things I am worried about are the fees they pay towards google and
apple which is 30% of their overall transactions the company has come out and said that they are
worried that apple and google potentially changing their fee structure or policies that would damage
their profitability overall so most of their transactions are going through apple and google
and if they decide to change their fee structure they'll be a huge hit to the company for the long
term but the area that I’m really worried about has to do with their younger user base and the
companies come out during their sec s1 filing and talk about some of the concerns that they have so
I wanted to read this quote this demographic may be less brand loyal and more likely to
follow trends including viral trends and other demographics we also may not be able to penetrate
other demographics in a meaningful manner to compensate for the loss of daily active users in
this age group so as quickly as Roblox Stock (RBLX Stock) has expanded in popularity in the past year
it's possible that we see a contraction and one of the ways that I’m kind of worried about that
is what we've been seeing with some of the viral trends for video games like among us
in the past year this is a game that kind of popped up out of nowhere and you get these
content creators that are promoting it and it explodes in popularity and becomes one of the
most popular video games 2020 but then it's kind of fallen off as the novelty is kind of worn off
and so that is something that I’m really worried about not only do you have the potential that the
platform gets stale you have the possibility that their users just grow up and you have
the potential that they're not going to be as interested in the platform anymore and so this
is something that the company has addressed as a concern and it really worries me going forward
because I don't know about the longevity of the company when I look for long-term investments
I want to not only see that they're going to be expanding in the future and they've had done well
in the past but I want to know that the company is going to be around in five to ten years and with
Roblox Stock (RBLX Stock) I’m not really sure you do have the examples of something like a Minecraft
that has really stayed popular for like the past decade but recently has gotten more popular so
there are examples of video game companies sticking around but the fact that they're relying
on this one platform and they're very reliant on the user base sticking around does have me pretty
worried considering it is a free-to-play game compared to the activision blizzards of the world
where they have like the 60 game so that does worry me for a bit also I try to go on YouTube and
watch some of the content to have an understanding of what Roblox Stock (RBLX Stock) really was and
I made it towards the search and then I saw the thumbnails and I was like uh this is not targeted
towards me you know what that is totally fine some of these channels have like 8 million subscribers
I’ve never heard of it's crazy I’m happy some people are enjoying it but it shows that the
community is active and there are people making content for this game that people really enjoy
but yeah it's just not for me so I don't love buying stocks for companies that I don't use
that's kind of a red flag for me so overall this is a very interesting company I think
having Cathie wood on your side with the Ark ETFs is always a great Bull case because she is a very
vocal bull and the fact that she is back to the company by buying shares of it for their internet
etf $ARKW makes me feel pretty good because I’m sure she's done all of her homework and she is
much more qualified than I am but there are some red flags I see like the potential dangers of the
google and apple uh changing their fee structures we've been seeing problems with that with Fortnite
with epic trying to go around that and then getting removed from the app store which would
obviously be a huge detriment to the company for the long term because that is where a majority
of their users are playing through they also have the great concept of having users creating great
content and being incentivized for it financially that keep people around on the platform so I do
absolutely love that for the company but I am worried about the longevity of the company as the
companies come out and said that they are worried about the younger demographics growing out of the
app so as of right now I’m going to give it a 4 out of 10 on the Magoo scale in the short term
I think it's very interesting and there's been a lot of hype and momentum surrounding it but
based off of what I see with the company and what I’d look for long-term investments
not something that I’m really looking to add to my portfolio but I am very curious if you
decided to buy Roblox Stock (RBLX Stock) why what did I miss what do you see with a company
that maybe I didn't value as highly and so I’m very curious to see why people have been
buying into Roblox Stock (RBLX Stock) let me know in the comment section down below thanks
for watching these videos I appreciate all support and I will see you next time