Roblox (NYSE:RBLX) stock is tanking, but so are all gaming stocks. It appears that Chinese regulators have made up their minds to make the gaming sector their next target. However, RBLX should remain relatively unscathed due to it having only a minor presence in China at the moment.
Long story short, China has been “talking the talk” for several years when it comes to cracking down on technology companies.
But Chinese regulators have never backed up that talk with action, until now.
Recently, China’s government essentially obliterated its entire online education sector by making it impossible for education companies to turn a profit.
China’s sights are now set on the gaming sector. The Chinese state-backed Xinhua newspaper recently published a scathing article about of the online gaming industry, even going so far as to call it “spiritual opium.” The publication also claimed
Given the state of affairs after China’s government went after the education sector, it makes sense that fear is running rampant in the markets today. People are worried, and rightly so, that what happened to the for-profit education sector could happen to the gaming sector to some extent.
A RBLX Buying Opportunity
In our opinion, this news makes certain Chinese-focused gaming stocks untouchable at the moment. Surely, another shoe will drop in this situation. Wait for that shoe to drop before buying the dip.
But Roblox is shielded here. The company has a Chinese gaming license through a strategic partnership with Tencent, but Roblox currently doesn’t have major operations in China. So Roblox is down on the news out of China, but Tencent is, in fact, in much worse shape.
Indeed, Roblox’s future growth depends on China. But we believe today’s regulatory issues will be yesterday’s news by the time Roblox begins to have major operations in China.
And to that extent, we think the current RBLX stock dip is a solid buying opportunity.
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On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
By uncovering early investments in hypergrowth industries, Luke Lango puts you on the ground-floor of world-changing megatrends. It’s the theme of his premiere technology-focused service, Innovation Investor. To see Luke’s entire lineup of innovative cutting-edge stocks, become a subscriber of Innovation Investor today.