We recently published a list of Ark Invest Stock Portfolio: Top 10 Stocks to Buy. In this article, we are going to take a look at where Roblox Corporation (NYSE:RBLX) stands against other top stocks to buy from Ark Invest’s portfolio.

ARK Investment Management LLC, commonly known as ARK Invest, is an American investment management firm headquartered in St. Petersburg, Florida. Founded by Cathie Wood in 2014, the firm specializes in actively managed exchange-traded funds (ETFs) focused on disruptive innovation. As of Q4 2024, ARK holds over $12 billion in 13F securities, with its top ten positions comprising slightly over 50% of its diversified portfolio, which typically comprises between 35 and 55 holdings. The firm’s investment approach spans various market capitalizations, sectors, and geographies, aiming to identify and invest in companies poised to lead in transformative technological advancements.

Cathie Wood, born Catherine Duddy Wood in 1955, is widely recognized as one of the most influential figures in the investment industry. As the founder, CEO, and chief investment officer of ARK Investment Management, she has carved out a reputation for her innovative and forward-thinking investment strategies. Wood’s approach to investing has consistently focused on identifying and capitalizing on disruptive innovation, setting her apart as a visionary in the financial sector.

After graduating from the Notre Dame Academy Catholic girls’ school, Wood pursued higher education at the University of Southern California (USC), where she earned a summa cum laude degree in finance and economics in 1981. She later completed a Master of Business Administration in finance at USC’s Marshall School of Business. A key influence in her academic journey was economist Arthur Laffer, known for the Laffer Curve, which theorizes the relationship between tax rates and tax revenue. Laffer’s mentorship helped shape Wood’s understanding of economic theory and her investment philosophy.

Wood’s career in finance took off after graduation, with roles at prestigious firms such as Jennison Associates, where she spent 18 years in various leadership roles, and Capital Group, as an assistant economist. At AllianceBernstein, where she managed over $5 billion, she honed her ability to identify long-term growth trends. Despite criticism of her investment decisions during the 2008 financial crisis, Wood remained steadfast in her belief that disruptive innovation would drive the future of economic growth. She later went on to co-found Tupelo Capital Management, a hedge fund focused on global thematic strategies.

In 2014, Cathie Wood founded ARK Invest with the goal of focusing exclusively on disruptive innovation and seizing the investment opportunities it generates. Her pioneering move involved structuring actively managed investment strategies as exchange-traded funds (ETFs), an industry-first approach that allowed a broader range of investors to participate in emerging technologies. She recognized that investing in such transformative technologies requires active management to navigate rapid changes, an open research ecosystem unrestricted by sectors, geographies, or market capitalizations to capture technological convergence, and the sharing of knowledge to deepen understanding of emerging industries. Reflecting these principles, ARK stands for Active Research Knowledge—a philosophy that underpins the firm’s investment approach.

Accordingly, ARK’s investment philosophy is centered around thematic investing in disruptive innovation, leveraging over 40 years of experience in identifying high-growth opportunities. ARK defines disruptive innovation as the introduction of technologically enabled products or services that significantly alter existing industries. The firm’s research process focuses on cross-sector innovations such as artificial intelligence, autonomous vehicles, Fintech, robotics, energy storage, DNA sequencing, 3D printing, and blockchain technology. ARK’s goal is to seek long-term capital appreciation by investing in these cutting-edge industries, believing that companies driving technological advancements will fundamentally reshape industries and offer outsized returns compared to traditional investment strategies.

Our Methodology

The stocks discussed below were picked from Ark Invest’s Q4 2024 13F filings. They are compiled in the ascending order of the hedge fund’s stake in them as of December 31, 2024. To assist readers with more context, we have included the hedge fund sentiment regarding each stock using data from 1,009 hedge funds tracked by Insider Monkey in the fourth quarter of 2024.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

Roblox Corporation (NYSE:RBLX)

Number of Hedge Fund Holders as of Q4: 61

Ark Invest’s Equity Stake: $586.85 Million 

Founded in 2006 and headquartered in San Mateo, California, Roblox Corporation (NYSE:RBLX) has been a long-standing player in the gaming industry but has only recently gained mainstream recognition. This surge in popularity significantly boosted its valuation, climbing from $2.5 billion in 2018 to nearly $38 billion upon its debut on the New York Stock Exchange in 2021. In 2024, Roblox reported a revenue of $3.6 billion, reflecting a 28.7% year-over-year increase. The company also paid out $923 million to creators, reinforcing its commitment to supporting user-generated content and expanding its virtual economy.

Roblox CEO David Baszucki highlighted the company’s focus on innovation and fostering meaningful connections within its digital ecosystem. He emphasized Roblox Corporation (NYSE:RBLX)’s ambition to capture 10% of the global gaming content market while continuing to invest in its virtual economy, AI-powered discovery, and platform safety. Chief Financial Officer Michael Guthrie echoed this sentiment, noting that Q4 2024 results met or exceeded previous guidance. Full-year revenue and bookings increased by 29% and 24%, respectively, showcasing the scalability and efficiency of the company’s business model.

Roblox Corporation (NYSE:RBLX)’s financial performance in 2024 demonstrated strong growth; the company achieved $3.6 billion in revenue and $4.37 billion in bookings, marking a 29% and 24% year-over-year increase, respectively. Adjusted EBITDA stood at $180.2 million, while cash provided by operating activities climbed 79% to $822.3 million. Free cash flow also experienced substantial growth, reaching $641.3 million, underscoring Roblox’s ability to generate liquidity while investing in future expansion.

Looking ahead, Roblox Corporation (NYSE:RBLX) projects continued financial momentum in 2025, forecasting full-year revenue between $4.25 billion and $4.35 billion, with bookings expected to reach between $5.2 billion and $5.3 billion. The company anticipates a consolidated net loss between $995 million and $1.07 billion, alongside an adjusted EBITDA range of $190 million to $265 million. Operating cash flow is estimated to be between $1.05 billion and $1.11 billion, while free cash flow is projected between $800 million and $860 million. With strategic investments in technology, content, and monetization strategies, Roblox remains well-positioned for long-term growth and expansion.

SaltLight Capital stated the following regarding Roblox Corporation (NYSE:RBLX) in its Q3 2024 investor letter:

“Roblox Corporation (NYSE:RBLX) has firmly established itself as the dominant player in user-generated gaming within Western markets. Meanwhile, Tencent has developed a similar ecosystem in China with its WeChat Mini-games platform. Owning both gives us a unique vantage point to assess the evolving landscape of user-generated gaming platforms globally.

At its recent investor day, Roblox set an ambitious target of reaching 10% of gaming content revenue, of which it estimates the total pool is around $180bn (for context, in the last twelve months, it made $4bn in bookings).

We think this will be a challenging target, but it will be positive for the business directionally. The reason is that Roblox has spent the last three years heavily investing in re-engineering its game platform to be high fidelity, performant and widely available across platforms. They also share economics with their creators to the point now that the absolute numbers in highly engaged games are enough to support a small game studio. The result is that the quality of games has materially improved, attracting additional engagement – particularly from older users…” (Click here to read the full text)

Overall, RBLX ranks 5th on our list of top stocks to buy from Ark Invest’s portfolio. While we acknowledge the potential for RBLX as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than RBLX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires

Disclosure: None. This article is originally published at Insider Monkey.