Roblox Corporation (RBLX) in San Mateo, Calif., develops and operates an online entertainment platform. It offers Roblox Client, an application that allows users to explore 3D digital worlds, while its Roblox Studio enables developers and creators to build, publish and operate 3D experiences and other content. The company’s revenue for its fiscal third quarter, ended Sept. 30, 2021, increased 102% year-over-year to $509.33 million. However, its loss from operations widened 50.3% to $77.44 million, while its net loss widened 52.2% year-over-year to $74 million.
The stock has declined 41.1% in price year-to-date to close yesterday’s trading session at $60.67. It is currently trading 57.1% below its 52-week high of $141.60. The stock looks overvalued at the current price level. In terms of forward EV/S and P/S, RBLX’s respective 13.45x and 12.89x are higher than 2.39x and 1.71x industry averages. In addition, its 61.28x forward P/B is 2,217.3% higher than the 2.64x industry average. So, we think it is best avoided now.
With metaverse being characterized as the next big technology platform, the industry is expected to witness significant growth over the long term. According to the Market Research Future report, the global metaverse market is expected to grow at a CAGR of 41.7% between 2021 and 2030. So, instead of betting on RBLX, we think it could be wise to add quality stocks Microsoft Corporation (MSFT) and QUALCOMM Incorporated (QCOM) to one’s portfolio. These stocks are well-positioned to capitalize on the metaverse industry tailwinds.
Microsoft Corporation (MSFT)
Famous technology company MSFT in Redmond, Wash., develops and supports a range of software products, services, devices, and solutions. The company operates in the Productivity and Business Processes; Intelligent Cloud; and Personal Computing segments.
On Jan. 18, 2022, MSFT announced that it would buy gaming giant Activision Blizzard, Inc. (ATVI) in an all-cash deal worth $68.70 billion. This deal would help MSFT realize its vision of building technologies to create a metaverse. The acquisition also makes MSFT the third largest gaming company in terms of revenue.
MSFT’s revenue increased 20% year-over-year to $51.72 billion for its second fiscal quarter, ended Dec. 31, 2021. The company’s operating income increased 24% year-over-year to $22.24 billion. Also, its net income increased 21% year-over-year to $18.76 billion, while its EPS came in at $2.48, compared to $2.03 in the year-ago period.
Analysts expect MSFT’s EPS and revenue for its fiscal 2022 to increase 16% and 18.4%, respectively, year-over-year to $9.34 and $199.03 billion. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 24% in price to close the last trading session at $301.25.
MSFT’s strong fundamentals are reflected in its POWR Ratings. It has an overall B rating, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
It has an A grade for Sentiment and a B grade for Stability, and Quality. It is ranked #19 of 171 stocks in the Software – Application industry. Click here to check MSFT ratings for Growth, Value, and Momentum.
Click here to check out our Software Industry Report for 2022
QUALCOMM Incorporated (QCOM)
Wireless technology company QCOM in San Diego, Calif., provides technologies and products for mobiles, wireless devices, automotive, computing, Internet of Things (IoT), and networking. It is also currently engaged in developing, launching, and expanding 5G technology.
On Nov.16, 2021, QCOM announced that Bayerische Motoren Werke Aktiengesellschaft (BMWYY) would use QCOM’s chips in its driver-assistance and self-driving systems. QCOM’s CEO Cristiano Amon said that the company’s total addressable market would increase from $100 billion to $700 billion in the next decade on its expansion into developing chips for automobiles and Internet of Things devices for consumer and industrial applications.
For its fiscal first quarter, ended Dec.26, 2021, QCOM’s non-GAAP revenues increased 30% year-over-year to $10.69 billion. The company’s non-GAAP net income increased 47% year-over-year to $3.68 billion. Also, its non-GAAP EPS came in at $3.23, representing a 49% increase year-over-year.
For the quarter ending March 31, 2022, QCOM’s EPS is expected to increase 49.5% year-over-year to $2.84. Its revenue for its fiscal year 2022 is expected to increase 24.1% year-over-year to $41.54 billion. It surpassed consensus EPS estimates in each of the trailing four quarters. Over the past nine months, the stock has gained 30.3% in price to close the last trading session at $179.10.
QCOM’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
It has a B grade for Momentum, Sentiment, and Quality. It is ranked #21 of 100 stocks in the A-rated Semiconductor & Wireless Chip industry. To see the additional ratings of QCOM for Growth, Value, and Stability, click here.
Click here to checkout our Semiconductor Industry Report for 2022
MSFT shares were trading at $305.50 per share on Friday morning, up $4.25 (+1.41%). Year-to-date, MSFT has declined -9.16%, versus a -5.78% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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