Weekly Rounup
Last week was a bit slower. I published two articles, one on Roblox and one on Nvidia. I have a few items in backlog that I’ll highlight below too.
Roblox (RBLX)
Article: Link
Disclosure: No current position
Overview: Roblox is a gaming company and is a cornerstone of Cathie Wood’s index funds. The company had one of the best preforming IPOs last year, but as of late the stock has been crushed. In early February, The Bear Cave hit Roblox with a short report. Unlike a typical short report, Bear Cave’s thesis primarily revolved around misconduct allegations at the company.
Although this is concerning, Bear Cave is not an actual hedge fund or short research fund. It’s a blog on Substack. But I will give credit where credit is due. The author did a lot of digging and communicated with several former employees to verify these allegations. Stifel Nicolaus, which is an actual investment bank, echoed Bear Report’s concerns stating that they are questioning if Roblox has built a safe environment for children, whom are its primary users.
On top of all of this, Roblox reported Q4 results mid-February and they did not leave much to be desired. Growth is slowing, which has some investors thinking perhaps Roblox purely benefited from COVID and remote learning environments.
At the end of the day, Roblox has a decent little operation. The company is cash flow positive and they are growing revenue over 100% annually, which is not sustainable in the long-term. Even if growth slows, it likely will still be high double digits. My main concern is that Roblox will not be able to compete with the likes of Microsoft, Sony, and other tech behemoths making a splash in gaming.
My prediction: Roblox gets acquired. I think a possible acquirer could be Netflix.
NVDA (RBLX)
Article: Link
Disclosure: 47 shares at $225 average price
Overview: I'll start off by saying I made a giant mistake with Nvidia. It was one of those stocks that I always told myself I'd buy next quarter. As we all time, time in the market is more important than timing the market. When I did some portfolio reallocation back in the fall, I decided Nvidia would be a new position (regardless of price).
The company's Q4/2021 results were quite impressive. Gaming and data centers are quickly becoming major growth engines for the company. I like this because both of these end markets have expanding TAMs.
Looking purely at the fundamentals, Nvidia is growing its top-line over 50% and it's expanding margins. This is flowing right down to cash flow. The company has a healthy balance sheet (a lot cash, not over-levered) and a solid roadmap for future growth in all of its reporting segments.
Like a lot of other tech giants, though, Nvidia is not immune to supply chain hiccups. The company's inventory is building up, but the CFO did a great job commenting on this in particular, and how the company will navigate the lingering disruptions to supply chain.
Overall I am bullish and have been slowly adding to my position.
Backlog:
Over the next week or so I’ll be releasing some thoughts on the following:
SoFi: Building the AWS of Fintech
Coinbase 2021 results
Teladoc 2021 results
Square: Potential M&A targets
Matterport: Where is it headed?