The company’s $1.4 billion in short-term investments lengthen that runway to about 2 years, but only if its losses stagnate and do not continue to grow. For a company with $828 million in cash and cash equivalents, this quarterly net loss stat gives Roblox less than a year of runway. If things continue this way, 2023 will shatter Roblox’s 2022 net loss record.
And in Q1 2023, it had a quarterly consolidated net loss of $269 million. In 2022 it had an annual consolidated net loss of $934 million. In 2021 Roblox had an annual consolidated net loss of $503 million. Roblox is burning money faster and faster each year. But as an investment, this is one metaverse stock to avoid.
It was thought that the metaverse needed content, and Roblox is a content-creating machine. The company is known for its popularity among children, but is also popular with teens and adults. It’s a set of tools that lets anyone create, share and profit from their own video games. That’s because Roblox is not just a game it’s a development kit. Roblox (NYSE: RBLX) was once touted as a top metaverse investment due to its unique position as a content creation platform.
So while the market appears to have pivoted from the metaverse to AI, it’s good to do some portfolio cleaning and get rid of these metaverse stocks to sell. And if these companies were ever profitable, they aren’t now. A careful look at their business model will show a company that just doesn’t make sense without the promise of the metaverse to latch onto. Where once they soared on hype alone, they have now fallen due to grim reality. The metaverse stocks that should be most avoided are those whose existence is hard to justify in the current market. Some good stocks were caught in the metaverse hype cycle, but also many bad ones. Many even have falling revenue or a lack of cash. The worst metaverse stocks an investor should avoid are those with no profit and no path to profit. Without a sprawling metaverse to justify their existence, some stocks have to justify themselves on good old-fashioned free cash flow, of which they have little to none. While many metaverse stocks are strong enough to quickly pivot to artificial intelligence ( AI) or other ideas, many unstable metaverse stocks haven’t been so lucky. And many high-risk metaverse stocks have been crushed alongside it. But this dream has hit the crushing reality of high-interest rates and low returns on investment. A world of infinite possibilities that anyone can plug into from the comfort of their own home.
Even from its name, the metaverse seems like a science fiction dream come true.
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