Tuesday, July 27, 2021
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Roblox Puts IPO Base In Play With 110% Sales Growth, 193% Q1 EPS Estimate


While youth-oriented game developer Roblox (RBLX) has not joined Pinterest (PINS), Progyny (PGNY) or Lovesac (LOVE) on IPO Leaders, it has emerged as one of the top IPO stocks to buy and watch. The stock is testing a breakout Tuesday.




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Boosted by 110% sales growth last quarter and big estimates for Q1 earnings, Roblox joins Boston Beer (SAM) and Floor & Decor (FNC) on Leaderboard as RBLX stock sets up an IPO base. (SAM stock and FND stock were both recently featured in IBD while setting up new buy points.)

PINS stock and PGNY stock are also forming new chart patterns ahead of their next earnings report.

As one of today’s fastest-growing stocks, analysts expect Pinterest to pin down 160% EPS growth for Q1.

As Pinterest did after its 2019 IPO, Roblox aims to follow its strong sales increases with powerful earnings growth. Roblox is not yet profitable but has posted eight quarters of powerful revenue gains, including a 110% spike in Q4.

PINS stock has soared off its March 2020 lows as Wall Street correctly bet that profits would eventually emerge from the social media stock’s sales performance. In Q4, Pinterest posted 258% earnings growth. Including 2020, the company has generated average annual sales growth of 50% over the last three years.

Driven by hugely popular mobile games for young teens, Roblox has generated average annual sales growth of 64% over the last three years. Now it’s playing for profits, with analysts consensus of 193% earnings growth in its first report as a public company.

Roblox has not announced the date of its report. Pinterest is expected to report in early May. (Use the Earnings Calendar to track upcoming reports.)

Reality Engine Drives Real Growth For Roblox

Founded in 2004, Roblox seeks to power the imaginations of people around the world. Its Reality Engine forms the core of the Roblox virtual experience.

The San Mateo, Calif.-based company developed the high-performance, cross-platform, real-time simulation engine to dynamically scale to match a device’s capabilities. Roblox uses network layering to ensure smooth, real-time experiences for all players.

Roblox ranks as one of the top online entertainment platforms for audiences under the age of 18. The game maker is powered by a global community of over 2 million developers that produce their own immersive multiplayer experiences.

In March, Fast Company noted that every month over 100 million global active users collectively spend more than 1 billion hours on Roblox.

RBLX Stock Forms IPO Base

Roblox is testing a 79.20 buy point in an IPO base.  In a sign of stock market leadership, its relative strength line has already hit a new high.

As RBLX stock shows promise, note that the performance of Playtika (PLTK) serves as a reminder that new IPOs can be volatile.

Playtika stock looked on the verge of an IPO base breakout in February before dropping sharply. Playtika is now tightening up as it tries to retake its 10-week moving average.

See how Roblox reports earnings and how Wall Street reacts. If it does break out in strong volume, look for the stock to build on such a move, keeping sound sell rules in mind.

On Monday, Roblox came off its lows to rise over 4%. On Tuesday, RBLX stock is up over 7% and is now testing the entry price.

RBLX stock has not been trading long enough to establish a 50-day moving average or an Accumulation/Distribution Rating, which measures institutional buying and selling over the trailing 13 weeks.

Also see how PINS stock and Progyny perform as Q1 earnings season kicks in.

Follow Matthew Galgani on Twitter at @IBD_MGalgani.

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