Traders must weigh the advantages of large person progress towards ongoing losses and a rising valuation.
Roblox (RBLX -1.70%) inventory appears to have lastly returned to progress. After years of range-bound buying and selling following its large drop in 2022, the inventory has risen by greater than 180% during the last 12 months as video games reminiscent of Develop a Backyard have helped revive the recognition of the metaverse platform.
Nonetheless, a lawsuit pertaining to a vital a part of its person base may immediate a few of its traders to promote. When additionally contemplating the corporate’s ongoing losses and excessive valuation, traders ought to query whether or not the leisure inventory’s beneficial properties can proceed.
Picture supply: Getty Photos.
The state of Roblox’s enterprise
Roblox is a gaming platform the place customers create and play video games. It contains talents reminiscent of speaking with pals or creating a private avatar. Its conventional following was kids below the age of 13, although customers who’re 13 or over now make up 64% of its each day energetic person (DAU) base.
Certainly, the expansion in DAUs appears to have drawn the eye of traders. That person base, which nearly reached 112 million within the second quarter of 2025, grew 41% over the earlier 12 months.
That enhance has possible drawn extra customers to buy Robux, the digital foreign money used inside the Roblox ecosystem. Robux enable customers to purchase avatar upgrades and particular talents in video games, thereby driving the vast majority of the corporate’s income.
Sadly for Roblox bulls, this progress has not occurred with out hiccups. The most recent issue arises from a lawsuit filed by the state of Louisiana. It alleges that Roblox lacks an efficient age verification course of, permitting predators to lie about their age and prey on kids.
Roblox responded, stating that it has launched over 40 options to guard kids and empower mother and father and guardians to maintain them secure. It is too early to inform how this lawsuit will have an effect on Roblox or its inventory, nevertheless it’s a reminder of the challenges the corporate faces within the market.
Roblox by the numbers
Furthermore, traders have trigger to query whether or not the monetary enhancements are coming too slowly. Within the first half of 2025, income of simply over $2.1 billion elevated by 25% in comparison with the identical interval final 12 months. The corporate additionally restricted expense progress to twenty%.
The issue is that its almost $2.7 billion in prices and bills is nicely above Roblox’s income ranges. Thus, its $493 million internet loss for the primary two quarters of 2025 was barely greater than the $476 million misplaced throughout the identical timeframe in 2024.
Regardless of its appreciable losses, the free money stream image could mitigate the shortage of profitability. Free money stream for the primary half of the 12 months was $603 million, almost doubling from year-ago ranges. Thus, when accounting for the $544 million in stock-based compensation bills and the $539 million in deferred income, its financials are in higher form than its internet losses would possibly suggest.
Additionally, for 2025, the corporate forecasts income between $4.39 billion and $4.49 billion for the 12 months. If that prediction holds, it would characterize a 23% enhance, almost as excessive because the income progress thus far this 12 months.
Roblox inventory has made appreciable beneficial properties below these circumstances. Nonetheless, these will increase have additionally raised its valuation, taking the inventory’s price-to-sales (P/S) ratio to just about 21. Though that is nicely beneath post-pandemic ranges, it is also Roblox’s highest gross sales a number of since 2022. Because the P/S ratio has greater than doubled since April, it might make traders extra cautious about shopping for Roblox inventory.
RBLX PS Ratio information by YCharts
Is it time to purchase Roblox inventory?
Beneath present situations, traders ought to watch Roblox inventory, however they need to additionally think about refraining from including shares at the moment.
The corporate has skilled important progress in DAUs and income over the previous few quarters, because the platform’s recognition has elevated. That ought to in the end bode nicely for the inventory’s long-term prospects.
Sadly, it is unclear how the state of Louisiana’s lawsuit towards the corporate will have an effect on Roblox’s progress. Moreover, though free money flows are sturdy, the huge losses stemming from stock-based compensation and different bills may proceed to weigh on its financials.
When additionally contemplating Roblox’s more and more costly valuation, it is possible finest for traders to remain on the sidelines till Roblox’s financials present a path to profitability.
