1 Growth Stock Down 60% to Buy Right Now

In the ever-evolving world of investing, it's crucial to stay vigilant for opportunities that may have been overlooked by the market. One such opportunity presents itself in the form of Roblox (RBLX), a growth stock that has experienced a significant decline of 60% from its November 2021 peak. Despite this drop, Roblox's fundamentals remain strong, making it an attractive investment for those willing to look beyond short-term market fluctuations.



Roblox's unique business model generates revenue through the "Robux" virtual currency, a marketplace for digital items, subscriptions, and advertisements. This model has proven resilient, driving user engagement and spending within the ecosystem. In the third quarter of 2024, Roblox hit multiple operating records, with daily active users (DAUs) climbing by 27% year over year to 88.9 million, its highest growth rate since 2021. Similarly, bookings increased by 34%, well above the 20% growth rate in Q3 2023. As revenue reached $919 million, up 29% from last year, the momentum has translated into an improving financial position, with free cash flow turning positive and expectations for narrowing losses.



Management is projecting confidence, hiking its revenue growth guidance and its target for adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). The takeaway is that Roblox is entering 2025 on a strong note, despite the stock's recent decline.

The primary reasons for Roblox's stock price decline include a shift in investor sentiment towards growth stocks, concerns about user engagement and spending trends, and valuation concerns, with the stock trading at a high price-to-sales ratio of 8. However, Roblox's strong fundamentals suggest a potential buying opportunity for long-term investors.

In conclusion, Roblox's impressive growth in users and bookings, coupled with its unique business model, positions it well for long-term success. Despite the stock's recent decline, investors with a long-term perspective may find Roblox an attractive opportunity. As always, it is essential to conduct thorough research and consider your risk tolerance before making any investment decisions.