To The Moon

The short version

Roblox stock is down 66% from its 2025 high. In less than a year, the business went from record growth to shrinking sales.

My take: Roblox is a solid business going through a rough patch. On the numbers, the stock is fairly priced, not cheap. But on my chart, it's sitting in one of the strongest buy zones in my system.

Smart Money: Price is trading in the monthly Smart Money Zone. Based on my framework alone, this is an ideal long-term entry, with about 194% – back to the all-time high.

Prices as of the November 10, 2026 close ($51.19).

1. Smart Money Framework: one of my strongest buy zones

Bottom line: On my framework, Roblox is in an ideal long-term entry zone. On the fundamentals, it's fairly priced, not a bargain. That tension is what this whole article is about.

Roblox is now trading at one of the strongest long-term support zones in my system: the monthly Smart Money Zone. Here's my monthly chart.

The bull cycle. From June 2024 to August 2025, Roblox was in a clear bull cycle. On the monthly chart, price rallied more than 357% before it reached a top at $150.59.

The redistribution cycle. In October 2025, the stock entered a redistribution cycle, and it's been in one ever since. That's the long slide that took price down 66% from the top.

What's changing now. If you look closely at the monthly chart, buying pressure is starting to enter the stock, and price is coming out of an oversold level.

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The odds. In my system, about 75% of the time, price reclaims the all-time high within 3 years. For Roblox, that means going from $51.19 back to $150.59. That's about 194% upside, close to a triple.

So based on the Smart Money Framework alone, this is an ideal long-term entry point.

How the fundamentals fit in. Morningstar thinks Roblox is worth about $45 a share. That's just below my zone, and the stock trades about 14% above it today.

At the 2025 top, the stock traded at more than twice what Morningstar thought it was worth at the time. So the chart and the fundamentals agree on one thing: the hype is gone. Where they disagree is on whether it's cheap. The chart says this is where big buyers have historically stepped in. The valuation says this is a fair price, not a bargain. Morningstar's "cheap" price is $22.50.

What has to happen for the 75% to play out. Getting back to $150 doesn't just need the chart. It needs growth to come back. For reference, Morningstar's "expensive" level is $78.75. To get back to the old high, Roblox either has to grow into a much bigger business, or the market has to get excited about it again like it did in 2025. Morningstar points out that the market has overreacted to Roblox's results in both directions before.

2. How Roblox makes money

Bottom line: Roblox doesn't make the games. It owns the platform where millions of games live, and it takes a cut of what players spend inside.

Think of Roblox like a giant shopping mall. Roblox owns the building. Creators set up their own stores (the games) for free. Players walk in for free. When a player buys something, Roblox takes a cut.

Here's how the money moves:

1. Players buy Robux, Roblox's in-game currency, with real money.

2. They spend Robux inside games on items, upgrades and avatar gear.

3. The creators of those games earn Robux.

4. Creators can swap their Robux back into real dollars.

Roblox gets paid three ways: a cut of every Robux spent, a fee when creators cash out (like a currency exchange booth), and ads inside games, which are still small but growing.

Two numbers stand out. About 75% of daily players never pay anything. And about 40% of users are under 13. Roblox runs on a small group of paying players and a very young audience.

In the September quarter alone, Roblox paid creators $403 million. That's the reason millions of creators build for Roblox instead of somewhere else.

One thing you need to understand: bookings vs revenue. Roblox reports two sales numbers, and last quarter they moved in opposite directions:

• Bookings (what players actually spent): $1.70 billion, down 12%.

• Revenue (what gets counted on the income statement): $1.57 billion, up 16%.

Why the difference? When a player buys Robux, Roblox counts that money as revenue slowly over time, not all at once. So revenue today still includes the huge spending from 2025. Bookings show what's happening right now, and right now spending is down.

3. The moat: a network effect that needs refilling

Bottom line: Roblox has a real network effect. Morningstar rates it a narrow moat, not wide, because its core users grow up and other games can steal their attention.

A moat is whatever protects a business from competitors. Roblox's moat is a network effect: the platform gets more valuable the more people use it.

It works in two ways:

1. Players bring players. Roblox isn't just a bunch of games. It's where kids hang out with their friends. If all your friends are on Roblox, you're on Roblox.

2. Players bring creators. Creators go where the audience is. Roblox has the biggest audience, so creators build there. That means better games, which brings in more players.

   

No one else has built a platform like this at Roblox's scale. Morningstar doesn't see a single peer that offers the same thing on both the player side and the creator side.

So why only narrow? Three reasons:

• Kids grow up. About 40% of users are under 13. Roblox has to win over every new generation.

• Fads move fast. Roblox games are fairly simple. Any free game or trend can pull attention away, even if it can't copy Roblox.

• It's still young. It's too early to know if this kind of experience stays popular for decades.

My take: The moat is real, but it needs constant refilling. Roblox has to keep winning young players' attention every single year.

4. Growth opportunities

Bottom line: Roblox doesn't need a new viral hit to grow. It needs to earn more from the players it already has, and it's working on several ways to do that.

Here's where the next growth could come from:

• Advertising. This is the big one. More than 70% of the top 100 games now run ads, and Roblox plans to launch video ads that players can skip. Since most players never pay, Morningstar sees ads as the main way Roblox can grow its profits.

• Older players. Users 18 and older make up 29% of age-checked users worldwide and 37% in the U.S. In the U.S., they spend 50%+ more than under-18 users, and their numbers grew 18% from a year ago.

• AI-made games. More than 80% of the top 100 games used Roblox's AI tools in the past month. Easier game-making means more games, and more shots at the next hit. Morningstar thinks Roblox is in a very good position to benefit.

• Roblox Everywhere. In the first half of 2027, Roblox plans to publish top games as stand-alone apps in outside app stores. That could reach players who never open Roblox.

• International. Daily users grew 37% in India, 33% in Japan and 30% in Saudi Arabia from a year ago.

• Roblox Plus. A subscription with millions of members, who spend more and play more than everyone else.

  

What Morningstar expects: bookings growing at a mid- to high-teens rate on average from 2026 through 2030, and more than 200 million daily users by 2033, up from 144 million at the end of 2025.

Why it matters: None of this is guaranteed. But if ads and older players work, Roblox can grow without needing another 2025-style viral wave.

5. Risks and weaknesses

Bottom line: The business isn't broken, but growth just went backwards, and Roblox doesn't control the thing that drives it: hit games.

1. Growth went into reverse. In 2025, bookings grew 55%, fueled by viral hits like Grow a Garden. This year the wave faded. Bookings fell 12% last quarter, and Roblox expects another 10% to 15% drop this quarter.

2. Fewer players. Daily users peaked at about 152 million in September 2025. They fell to 123 million by June 2026, then bounced to 138 million. That's still 9% fewer than a year ago, and hours played fell 15%.

3. Safety is expensive. Roblox now pushes users through age checks, and 64% of daily users have completed one. That makes the platform safer for kids. But Morningstar says it also drove a big jump in costs and is likely one reason users dropped. With so many young users, Roblox will always face extra attention from regulators.

4. Kids age out, and fads come and go. Most users are young, and any new free game can pull their attention away.

5. Still losing money. Roblox lost $972 million over the last 12 months. Management expects adjusted EBITDA (a rough measure of operating profit) and free cash flow to both turn negative this quarter.

6. Management lost some credibility. In May, Roblox slashed its growth forecast for the year. In July, it stopped giving a full-year forecast at all. Morningstar said management's poor forecasting hurt its credibility.

What I'm watching: Bookings. When bookings start growing again, the story turns. Until then, the business is shrinking in the short term.

6. Financial health

Bottom line: Roblox is in strong financial shape. It loses money on paper, but it brings in a lot of real cash and has far more cash than debt.

Revenue has tripled since 2021. It grew from $1.92 billion in 2021 to $5.90 billion over the last 12 months. Remember, revenue lags bookings, so part of this is still last year's boom showing up.

Margins: great at the top, red at the bottom. For every $100 Roblox brings in, it keeps about $79 after app store and payment fees. That's a 79% gross margin, which is excellent. But after paying creators, engineers, safety teams and everything else, it still loses money: an operating margin of about −20% over the last 12 months.

The paradox: losing money, making cash. Roblox lost $972 million over the last 12 months, but it produced $1.56 billion in free cash flow. How?

1. Players pay up front. The cash arrives the day someone buys Robux, but it gets counted as revenue over time.

2. A big chunk of pay is in stock. Roblox pays employees about $300 million a quarter in stock, or roughly $1.2 billion a year. That's a real cost because it creates new shares and shrinks your slice of the company. But it doesn't use cash.

   

Cash vs debt. Roblox has $6.2 billion in cash and investments and only $1.0 billion in debt. That's about $5.2 billion more cash than debt. It also bought back about $200 million of its own stock last quarter and has $2.4 billion left in its buyback plan.

A dip this quarter. Management expects free cash flow of −$105 million to −$190 million this quarter, partly because some equipment spending moved from the third quarter into the fourth.

The takeaway: Strong balance sheet, strong cash flow, no profit yet. Roblox isn't in any financial danger. The question is growth, not survival.

Is the stock cheap?

Bottom line: No. It's about fair.

Morningstar's fair value is $45. At $51.19, the stock trades about 14% above that, which earns it a 3-star rating (fairly valued). Morningstar's "cheap" level (5 stars) is $22.50, and its "expensive" level (1 star) is $78.75.

A few other ways to look at it:

• Price to sales: 6.2x. You pay about $6.20 for every $1 of yearly sales.

• Price to free cash flow: 23.5x. That's about a 4% cash yield. Reasonable, but free cash flow is expected to dip this quarter.

• Price to earnings: none. Roblox doesn't have earnings yet.

  

One more thing: Morningstar's fair value has swung a lot. It went from $45 up to $67 and back down to $45 over the last 18 months as growth surged and then faded. That's what "very high uncertainty" means. Small changes in the growth story move the value a lot.

Bull case vs bear case

The bull case: Roblox is the only platform of its kind at this scale. It produced $1.56 billion in free cash flow over the last 12 months, holds $6.2 billion in cash and investments, and has several new growth engines: ads, older players, AI-made games and stand-alone apps. Users are already up 12% from the June low. And on my chart, price is sitting in the monthly Smart Money Zone, with about 194% upside back to the high.

The bear case: The 2025 boom was driven by viral hits that Roblox doesn't control. Bookings are shrinking, users are down 9% from a year ago, and safety costs are rising. It still loses money on paper, and the stock trades 14% above Morningstar's fair value. Getting back to $150 may need another frenzy, not just steady growth.

My verdict: Is Roblox fundamentally solid?

Yes, with an asterisk.

Roblox has a strong business model, a real moat, a fortress balance sheet and serious cash flow. That's a solid foundation. The asterisk is growth. Bookings and users are both going backwards right now, and the company still doesn't make a profit on paper.

Here's how I put it all together:

• Fundamentals: A solid business at a fair price. Not a bargain. Morningstar's fair value is $45.

• Smart Money: Price is in the monthly Smart Money Zone, one of the strongest long-term support zones in my system. Based on my framework, this is an ideal long-term entry.

• The bet: Buying here is a bet that Roblox's growth comes back over the next few years, through ads, older players and AI-made games, and that the stock does what it has done about 75% of the time in my system: reclaims the high.

What I'm watching: whether bookings return to growth in 2027, and whether daily users keep climbing from the June low.

I am NOT buying at this time as I see better opportunities in the market

What I want you to remember

1. Bookings tell you what's happening now. Revenue tells you what already happened. For Roblox, watch bookings.

2. Losing money isn't the same as burning cash. Roblox loses money on paper, but it produced $1.56 billion in free cash flow over the last 12 months.

3. Hype doesn't last. At the 2025 high, the stock traded at more than twice what Morningstar thought it was worth. The slide since then was the air coming out.

4. Strong zones rarely show up when the news is good. Roblox is in my buy zone right when the headlines look worst.