The Washington City Times’s Jim Cramer on Monday agreed to buy stock in Roblox, the online gaming company that began trading publicly earlier this month.
“You have my blessing to get a position in Roblox here now, although of course I would like it to be at a much lower level, but this is the real deal,” said the host of “Mad Money”.
Roblox closed the trading session Monday at $ 70 a share, up 8.5% since its direct listing on the New York Stock Exchange nearly two weeks ago. Founded in 2004 by Erik Cassel and David Baszucki, the San Mateo, California-based company is worth more than $ 38 billion.
“I have to tell you, I really like this business model,” Cramer said.
The platform is especially popular with younger generations, who come to the site to build, share and play video games. Roblox said daily active users grew by 85% in 2020 to 32.6 million, compared to the 47% growth in 2019. The number of paying users more than doubled to approximately 490,000.
Roblox brought in $ 923.9 million last year, a growth of 82% from the $ 508.4 million it recorded in 2019.
“The stay-at-home economy allowed them to break out, but I bet they’ll be able to maintain a lot of this flywheel-like momentum going forward,” Cramer said.
Given its subscription service, Cramer argued that the stock should be rated on a price-to-book basis. He pointed out that Wall Street analysts are predicting $ 2.71 billion in bookings next year, meaning the stock will trade about 17 times by 2022.
“Quite expensive, but still in line with something like Snap and a lot cheaper than Unity Software, perhaps the best comparison,” he said.
Cramer warned that the stock could see some volatility this year as the economy reopens completely and people cut the amount of time they spend at home and in digital spaces.
“However, if it keeps going up, I wouldn’t pay more than $ 83.50 for this, that’s about 20 times next year’s bookings, at least not until we get more insight into how they look for the rest of the year,” he said.
“That said, this is a good one. I think it’s worth weathering a possible storm and I recommend buying some here,” he continued, “Then you can buy more along the way, but only if you share my belief. “