Gaming company Roblox (NYSE:RBLX) operates a massive platform that allows creators to build and share their own games with little to no existing programming knowledge.

The platform is home to tens of millions of user-generated games, known as “Experiences” by the company. In the last 12 months, the company’s shares have gained almost 60 percent, raising the question of whether Roblox is still a buy today.

Key Points

• Revenue and free cash flow are rising fast, but Roblox has growing net losses.

• Daily active users and engagement hours are up, highlighting it has a strong platform despite mixed earnings.

• Shares are expensive, and ongoing stock-based compensation is diluting existing shareholders.

Roblox’s Growth Is Strong, But the Company Remains Unprofitable

Arguably the greatest strength Roblox has working in its favor is the fact that it is still posting favorable revenue growth numbers. In 2023 and 2024, Roblox reported full-year revenue increases in excess of 25 percent.

Since 2021, the company hasn’t had a single quarter in which its reported revenues declined on a year-over-year basis. This consistently high revenue growth has allowed the company to build its total revenues from just $924 million as recently as 2020 to over $3.6 billion last year.

The problem, however, is that all of this revenue growth hasn’t brought Roblox closer to net profitability on a GAAP basis. Despite revenue more than tripling since 2020, Roblox’s 2020 net loss was $254 million, while its consolidated net loss for 2024 was about $940 million. This leaves very real questions open as to whether and when the company will actually achieve net profitability.

Of course, it’s worth acknowledging that 2024 represented another rather strong year in many other regards for Roblox. Revenue for the year rose 29 percent, and bookings rose 24 percent to $4.4 billion. These metrics both show that Roblox continues to grow rapidly despite its ongoing losses.

One of the most crucial advances the company made in 2024 was an explosion in its free cash flow. For the full year, Roblox reported FCF of $641.3 million, up more than 400 percent from 2023. This coincided with a 79 percent increase in cash and cash equivalents from operating activities.

In 2025, Roblox expects to deliver revenue well in excess of $4 billion and bookings of over $5 billion, representing a continuation of its strong growth in these areas. Free cash flow is also expected to keep rising to reach a range of $800-860 million this year.

What About Valuation?

RBLX trades at a premium price that implies continued high growth rates. Right now, the stock is going for 10.4 times sales and 175.1 times book value. Even on a free cash flow basis, Roblox looks quite expensive. The ratio between the company’s enterprise value and its free cash flow is 58.3, making expensive by the standards of its most positive financial growth metric from the past year.

Analyst forecasts for Roblox still show some upside, but the stock doesn’t appear poised to repeat the returns it has delivered over the last 12 months.

Analysts give RBLX an average target price of $66.84, about 15 percent above the $58.10 it currently trades for. As such, Roblox would likely have to deliver stronger-than-expected performance in order to produce a level of return that justifies the risk of its high price tag.

Does Roblox Still Have a Moat?

One of the biggest concerns around Roblox has been whether or not it is still strengthening its moat among gamers and game creators. In the wake of the Q4 earnings report, shares sold off by more than 10 percent due to the fact that daily active users and bookings came in lower than Wall Street expected.

The fact that DAUs missed estimates, however, doesn’t necessarily mean that Roblox is losing its moat. After all, the number of DAUs in 2024 rose 21 percent to 82.9 million, while the number of engagement hours climbed 23 percent to 73.5 billion.

With growing user counts and engagement hours, it’s difficult to argue that Roblox’s competitive advantages are deteriorating.

How Risky Is Roblox?

At the end of the day, the fact that Roblox has made so little progress toward becoming profitable is its largest problem as an investment. With the stock trading at such high multiples, Roblox’s lack of positive earnings is fairly concerning.

What’s more worrying, though, is that the company actively expects to extend its losses in 2025. According to the full-year guidance provided alongside the Q4 report, Roblox anticipates a consolidated net loss of between $995 million and $1.07 billion this year.

Another issue for Roblox is the fact that it continues to issue new shares at a rate that could create dilution risks for existing shareholders. In 2024, for instance, Roblox increased its number of outstanding shares by 5.0 percent and reported about $1.0 billion in stock-based compensation expenses.

While this isn’t enough to make a huge difference while RBLX is moving quickly up and generating outsized returns, the gradual dilution of the company’s stock could be a problem over time if the stock stalls out.

Is Roblox Stock a Buy, Sell or Hold?

Roblox stock is a Hold at this time with a share price trading just marginally below the consensus price target of $66 per share according to 30 analysts.

Roblox offers investors a somewhat jumbled mix of positives and negatives. On the plus side, the company is growing its revenues and especially its cash flows at a very attractive pace. Roblox also continues to build its user base, increase its hours of engagement and carve out a niche for itself in the game creation world. By these standards, the company could be considered as an appealing growth play on the gaming industry.

The problems, however, come in the form of its seemingly indeterminate losses and the high price of its shares. Buying RBLX right now involves investing at a significant premium on earnings that could still be years in the future. As such, the stock could be quite risky to buy at current prices.

At the moment, RBLX is likely better to hold than to buy or sell. Buying presents a serious risk of overpaying, particularly after the strong returns the stock has seen in the past year. Those who have already held the stock as it ran up, however, may prefer to hold onto it to see if future performance produces additional upside. Despite its valuation risks, RBLX probably isn’t a good stock to sell right now because of the continued growth of the business and its revenues.