Roblox (RBLX -2.72%) hasn't exactly been a great performer recently. After rallying sharply through much of 2024 and into 2025, the stock fell sharply after reporting its fourth-quarter earnings and is down by nearly 20% from its February peak.
To be fair, there were some good reasons for the decline. Roblox gave weak guidance for the first quarter, and certain growth rates declined more sharply than expected. But there's also a lot to like, especially from a long-term standpoint.
Here's why I'm making the bold prediction that Roblox stock will double within the next three years -- and I'm putting my money where my mouth is.
NYSE: RBLX
Key Data Points
Tons of long-term potential
To be fair, there is a lot to like in Roblox's recent results if you're focused on the long term. There are now 85.3 million daily active users (DAUs) on Roblox, representing 19% year-over-year growth. Plus, growth in paying users (Roblox calls this "monthly unique payers") grew by the same percentage. And the business is becoming more profitable, as operating cash flow increased 29% year over year in the fourth quarter.
For 2025, Roblox expects revenue growth of more than 19% at the midpoint of its guidance, and about $830 million in free cash flow, which would be about 30% growth.
The long-term opportunity here is huge. Management has said many times that it aims to scale to 1 billion users over the long term, which would be nearly 12 times the current DAUs. With an estimated 3.4 billion people worldwide who play video games, this is certainly possible, and the business clearly has momentum.
At the company's recent developer's conference, management shared a goal of 10% of all gaming content globally running on Roblox's platform in the not-too-distant future, more than four times the current share. A new affiliate program could being many more creators onto the platform, and there is tremendous potential to leverage artificial intelligence (AI) technology. One near-term milestone will be the ability for creators to make AI-based characters on the platform.
The company continues to grow its platform in ways that appeal to a wider spectrum of potential users, not just the under-13 demographic it is known for. As an example, both the NFL and NBA have a presence on Roblox. There are other potential uses of the platform as well, such as academics, e-commerce, and entertainment -- three areas recently discussed by CEO Dave Baszucki.
Roblox continues to expand its potential reach, such as with its recent launch on Sony's PlayStation platform in the fourth quarter. And as metaverse technology evolves in the coming years, there should be more and more opportunities to grow the ecosystem. In fact, the global metaverse market is expected to more than 10x in size from 2024 through 2032, according to Fortune Business Insights, and this could create a massive growth tailwind for Roblox.
A double in three years?
To be clear, I'm well aware that this is a bold prediction. Doubling in three years implies an annualized gain of about 26%. And just for housekeeping purposes, Roblox stock trades for approximately $62 per share as I'm writing this, so I'll define a double as reaching $144 within three years from March 24, 2025. This would give Roblox a market cap of about $82 billion.
A lot would likely have to go well for the business (and for the economy) for this to happen. But at the current growth rate, Roblox would actually more than double free cash flow over the next three years. So if user growth and monetization continue to make progress, it's more of a realistic possibility than you might think.
