Roblox share price surges following direct listing

Online games company Roblox has joined a long-list of companies from the last year – including the likes of Snowflake, Bumble and Unity – which have enjoyed a strong day one pop following their listing on public markets.

Unlike those three companies however, Roblox skipped the IPO process completely, instead choosing to take the direct listing approach. Compared to an IPO, under a direct listing, a company sells its shares directly without the help of investment banks.

Of course, that doesn’t mean there’s no oversight. On Wednesday, before trade commenced, the New York Stock Exchange set a reference point of $45.00 per share for Roblox.

Demand for the stock went well above that reference point when its shares became tradable on the NYSE, with Roblox opening at $64.50 per share and finishing out the session at $69.50 per share.

At Wednesday’s closing price, Roblox trades some 54% ahead of the reference price set by the NYSE.

Putting the fun back in fundamentals: The FY21 outlook

While it's hard to say if yesterday’s investor frenzy was justified or not, Roblox has posted and continues to expect strong growth in the coming year.

To illustrate that point, for the year ending December 31 2020, Roblox said it had 32.6 million daily active users and boasted over 30 billion ‘hours engaged’ on the platform.

This translated to total booking of $1.9 billion and total revenue of $924 million. As with many other companies that have listed to much fanfare, Roblox also remains loss making, recording a $253 million net loss in FY20.

Looking ahead, Roblox’s management has forecasted continued lofty user and revenue growth for FY21.

For the first quarter of FY21, the expectation is for daily active users (DAUs) of between 37.6-39.6 million, implying a growth rate of between 59-68% on the prior corresponding period.

Revenue growth expectations are comparably high, with the company saying it expects Q1 revenues of between $320-335 million.

The company does however expect daily active user growth to moderate significantly for the full-year (FY21). Here the company said it expected full-year DAUs to come in at between 34.6-36.4 million, implying a growth rate of between just 6-12%, on the prior corresponding period.

Full-year revenue growth however is poised to remain elevated, with the company guiding for FY21 revenue of between $1,440-1,515 million, implying an impressive growth rate of between 56-64%, on the prior corresponding period.

By comparison, non-GAAP bookings are expected to come in at between $2,000-2,125 million

Those considered expectations are built on the assumption that a post-COVID world will hurt growth, at least to some degree. Here management said, as:

‘Restrictions ease, we expect the rates of growth in 2021 will be well below the rates in 2020, however, we believe we will see absolute growth in most of our core metrics for the full year.’

 Shane Walton | Financial Writer, Australia | Publication date: Thursday 11 March 2021