Thread by @goodalexander

I took a .5% position in Roblox $RBLX Nov 19'21 75 Calls for $3.5 to play a strong Nov 16 investor day. Data tracking in spite of back to school and a metaverse focused catalyst calendar I think can send the stock back to the $85 area

1/ Exhibit 1: Web Tracking data is surging

2/ This spike in traffic is surprising and corresponds with good app store performance. In Roblox's September investor day the CFO cautioned investors that back to school might see some decelerating usage. After seeing a brief dip to #50 in iOS we are stabilizing back near #20

3/ Roblox sells Robux tokens to players. Investors appreciate in game currency as an effective revenue model. For example, the crypto game Axie Infinity has 1.5 million daily active players and a $32 billion market cap compared to Roblox 46 million players and $40b market cap

4/ Rather than developing its own content, Roblox has 3rd party developers making applications and designs on its own platform. Big brands pay these developers to make Roblox attractions for players. Users then spend Robux on the resulting in game items and even trade them

5/ The resulting financial model has allowed Roblox to have extreme free cash flow margins alongside massive growth. It collects money up front, and isn't taking the IP risk like Netflix. This is akin to a video game version of Amazon's hugely successful 3rd party seller model

6/ Much as how cool brands boost Amazon's Prime user base, Netflix (Stranger Things), Gucci, and Vans paying devs to build Roblox content which players then interact with not only helps margins but also is a flywheel for Roblox user growth. Big Events can draw millions of users.

7/ It is key to understand that development teams external to Roblox are building the applications / code to make these concerts a success. During last CFO meeting, Roblox noted that many of these development teams are heavily venture backed. This makes Roblox a true platform.

8/ Per Zara Larsson having a 3.8 million person Roblox concert, integrating music and audio is a potentially massive growth and profit driver for Roblox and will be a key focus of the investor day. Roblox launched Listening parties in September ir.roblox.com/news/news-deta…

9/ I think street numbers of only 18% 2022 revenue growth are under estimating the flywheel effects of brands and concerts increasingly building on Roblox. Fortnite's 27.7 million user Travis Scott show was nearly 60% of the size of Roblox user base. And that's just 1 show

10/ Management isn't overly promotional and believe Roblox can reach 1B DAUs. This implies a far higher than 20% 2022 growth rate. They noted that 2016 Roblox players are spending far more now than 5 years ago and points to Gucci Garden as a key example of "aging up" spend

11/ When you flow 30% growth rates into a 37-40% free cash flow margin business and assume a forward free cash flow yield of 2.2% (fairly conservative given comps like Netflix or Snapchat yet alone Crypto) you could easily see Roblox take out the $100 all time high in June

12/ Yes, US regulators could crack down on children using Roblox. China limited Roblox usage though Southeast Asia usage due to Korea remains robust. I think the infra bill & extremely violent "Squid Games" will distract meaningful regulatory focus on Roblox into the investor day

13/ Q4 will be a big metaverse quarter. FB is likely to unveil a $3-5b annual spending budget on The Metaverse during its October 25 earnings call as implied during their late September CTO interview. Nvidia is likely to talk about the Metaverse extensively on Nov 9 investor day.

14/ However - I think Facebook will likely disappoint investors on timing of its Metaverse bets. Boz said Horizon will take 3-5 years to fully roll out vs Roblox which has huge usage today. Horizon also is clearly a workplace app first and foremost per Zuck's CBS demo

15/ Finally - I think investors are finally starting to realize that you can't simply "reopen" and go back to normal because gasoline is much more expensive and supply chains aren't as functional -- making Roblox and other beneficiaries a benefit of Xmas spending vs consensus

16/ My checklist going into the investor day:
A] Listening Party Usage and concert partnership update
B] Positive back to school engagement commentary
C] Positive outlook for Xmas spend.
Given metaverse catalyst path & volatile history happy to own vol on RBLX here

17/ In conclusion - I think Roblox is the best in class publicly traded Metaverse stock going into Q4, positive data tracking, a coherent story around Brand & Concerts driving DAU growth and growing appreciation of the in game currency model take $RBLX to mid 80s by late Nov.