Should I buy Roblox shares ahead of second-quarter earnings results?

Roblox Corporation (NYSE: RBLX) shares have weakened from their record highs above $100 registered in June, and the current price stands around $83. Roblox is scheduled to announce second-quarter earnings results on Monday, August 16th, and according to estimates, Roblox should post strong earnings results.

Fundamental analysis: Roblox will announce second-quarter earnings results this Monday

Roblox Corporation is an American video game developer that started trading on the New York Stock Exchange on March 10th, 2021. After the first day of trading, the company’s stock closed with a fully diluted valuation of $45.2 billion and a market capitalization of $38.2 billion.

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Roblox will announce second-quarter earnings results this Monday, and according to estimates, the company should post strong growth, driven by aging up and increasing number of daily active users. The number of daily active users above 13 years old grew by +111% in the first fiscal quarter of 2021 compared to the first fiscal quarter of 2020.

The growth rate for users below 13 years old was +60% for the same period, and Roblox attributed this “aging up” trend to the quality of the content and the creation that its developers are making.

Roblox Corporation has significant potential for international market expansion, especially in China, and it is important to say that the company currently generates more than 85% of its revenue from the US, Canada, and Europe. Roblox earns most of its money by selling its virtual currency to platform users, but it plans to monetize its existing user base to a greater extent in the future.

Last week, the company announced a partnership with music company BMG to bring hip-hop artist KSI to his first launch party on the Roblox platform. Even though Roblox continues with its business expansion, the analyst Mike Hickey assigned a $75 price target on the stock.

“The RBLX metaverse platform was a social utility during the pandemic, in our view, which could unwind as social restrictions are removed, schools reopen, and parental spend reallocates. We believe most children do not personally pay for their RBLX game experience, and because parents are not directly investing in the service, they are less emotionally connected and can easily throttle back spend post-pandemic,” said Mike Hickey, an analyst from the Benchmark Company, LLC.

Technical analysis: $80 represents the strong support level

Roblox shares have weakened more than 15% from their record highs registered in June, and if the price falls below $80 support, it would be a strong “sell” signal. On the other side, if the price jumps above $90, it would be a signal to buy shares, and the next target could be around $100.

Summary

Roblox is scheduled to announce second-quarter earnings results on Monday, August 16th, and according to estimates, Roblox should post strong earnings results. The analyst Mike Hickey assigned a $75 price target on the stock, and probably it is the not best moment to buy shares of this company.

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