Companies With an Expanding Niche Can Be Long-Term Winners

Most companies tend to find that they have their best profitability in a narrow niche. But over time, competition or changing consumer tastes can eat away at that niche. Many firms have found that expanding into other roles can be a long-term winner.

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  • Big tech companies in particular have been good about expanding beyond just one piece of hardware or software, and into creating a suite of experiences that can bring back customers time and time again.

    One company could become the next to make a similar move: Roblox (RBLX). Best known as a video game platform, it has the potential to move into a broader role in the internet as virtual worlds rise over time.

    Roblox is still in its early stages as a company, and profitability has been elusive. However, revenues continue to rise.

    Plus, Roblox has nearly $3 billion in cash on its balance sheet, and can continue to build out its position as a leader in the metaverse while other players trying to get into the space struggle to gain traction.

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  • Action to take: Investors may like Roblox shares at current prices with a long-term view in mind. Roblox still trades at less than half its peak market cap, and continued growth for the platform can lead to further returns in time.

    For traders, the July $50 calls, last going for about $3.35, can deliver mid-double-digit gains in the months ahead on a jump higher in shares. Traders may want to consider taking quick profits on a rally given the current market volatility.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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