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Why Roblox is Stephen 'Sarge' Guilfoyle's Favorite 'IPO'

Company was a metaverse play before the term even entered the public consciousness.

Roblox  (RBLX) - Get Roblox Corp. Class A Report, a 3-D educational game company that went public through a direct public offering (DPO) in 2021, is Stephen “Sarge’ Guilfoyle's favorite public offering of 2021. 

And though it has yet to make money and carries high multiples, he likes its prospects in 2022.

“This is a clear case of paying for growth,” Guilfoyle wrote recently on Real Money. “The stock is trading at 40 times the 12-month's trailing sales and over 100 times book. The margin is obviously still negative. But operating and levered free cash flows are indeed positive.”

Roblox came public last March. In a year that featured more than 400 IPOs and  600 or so "de-SPAC" offerings, Roblox stood out by using a direct public offering and avoiding an insider lockup period. 

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Roblox has a clean balance sheet, according to Guilfoyles, with a cash balance of over $1.9 billion and total debt at $244 million at the end of the third quarter.

Even though the company reported a net loss of $74 million for the third quarter, the company can afford to “burn cash for a while as it works toward profitability,” he wrote.

The company stock has about 6% of its float held in short positions which is “not enough to fire up the apes, but also too big to ignore,” Guilfoyle wrote. “The firm stands with a current ratio above 1.3, which is fine.”

Roblox is a "metaverse"-type company that priced at $45 initially and the stock is listed on the New York Stock Exchange.

The company will report fourth quarter earnings by March, Guilfoyle noted. The consensus view from sell-side analysts is a loss per share of 14 cents on revenue of $763 million. That would be a gain of 146% from the same period in 2020 or the fifth consecutive quarter of three-figure year-over-year sales growth.

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