Written by Norman Isaac Mwambazi

What to know this week: Roblox to go public, inflation data, AMC earnings

This week, investors are looking forward to new inflation data, which will be released by the Labour Department on Wednesday. …

This week, investors are looking forward to new inflation data, which will be released by the Labour Department on Wednesday. This data will offer a look at whether prices have already begun to rise, amid some investors’ fears ahead of a major economic reopening.

Aside from that, investors are also on the lookout for the highly anticipated direct listing for the video game company Roblox, as well as theatre operator AMC’s quarterly earnings report coming your way on Wednesday after market close.

Inflation data report

On Wednesday, March 10, 2021, the US Labour Department will release its monthly Consumer Price Index (CPI), which tracks changes in prices for consumers across a broad basket of goods and services.

Consensus economists expect the CPI to have risen to 0.4% month-over-month in February, which will be 0.1% up from the 0.3% monthly rise in January, according to Bloomberg-compiled data quoted by Yahoo Finance.

Over last year, the CPI likely rose by 1.7%, picking up from the 1.4% rise in January 2020. Putting aside more volatile food and energy prices, the CPI is expected to have risen 1.4% year-over-year to match its January increase. It is believed that much of the gain is mostly because of a jump in energy prices during the harsh winter weather last month.

Still, the possibility of an upside surprise in consumer prices gains has left investors nervous with many of them still fearful of inflationary pressures to rise rapidly later this year as more businesses reopen and many consumers start to spend the money they saved up during the pandemic.

Lewis Alexander, the Chief Economist of Nomura Holdings, a financial services company, wrote in a note Friday thus:

“If our forecast is correct, February would mark the beginning of a reversal of COVID-induced relative price changes. That would imply goods prices might decline but service prices might increase in coming months, as consumer demand shifts back to services requiring personal contact.

“We expect relative price changes between goods and services to exert modest inflationary pressure going forward. However, the persistent softness of rent inflation should limit the degree of acceleration in core inflation for some time, with the exception of an expected jump in year-on-year changes due to base effects.”

Federal Reserve Bank Chair Jerome Powell has reiterated repeatedly that he believes any impending rise in inflation this year will be “transitory,” resulting as the year-over-year data laps in 2020’s highly depressed inflationary prints.

It should be noted that inflation had held well below the Fed’s 2% target for years before the pandemic kicked in, as measured by core personal consumption expenditures (PCE).

The Federal Reserve Bank has signalled the economy remains “well below” its targets, suggesting it would not change its policy stance or work to stave off the first signs of rising inflation.

However, investors’ fears that the Fed may be downplaying the possibility of a surge in inflation have begun to evidently rise in recent weeks. Those concerns have only grown in amplitude as Congress passes additional stimulus to consumers, and as the Federal Reserve keeps its foot on the gas pedal with ultra-accommodative monetary policy comprising near-zero interest rates and a massive asset purchase program.

The benchmark 10-year Treasury yield surged to a one-year high of about 1.6%, jumping by more than 50 basis points from levels a month earlier, as investors priced in the possibility that the Fed may need to tighten policy sooner than later.

RBC Capital Markets economists wrote in a note Friday thus:

“It is the inflation profile once reopening begins in earnest that should be of most interest. The reality is that we are likely still a few months away from a significant supply/demand imbalance that is likely to take prices much higher. Our baseline is for inflation to easily print with a 3-handle in Q2 and for the balance of 2021 thereafter.”

Roblox to go public

Away from inflation, video game company Roblox is will hit the public markets this week, in one of the latest high-profile, public-facing companies to debut on the public market.

Roblox’s direct listing is set to take place on the New York Stock Exchange (NYSE) on Wednesday, March 10, 2021, under the ticker symbol “RBLX.” The company was set to go public late last year but its Initial Public Offering (IPO) was postponed amid a wave of exuberance in markets following Airbnb’s (ABNB) and DoorDash’s (DASH) IPOs.

What to know this week: Roblox to go public, inflation data, AMC earnings

By going public via a direct listing, Roblox will have existing stakeholders sell shares directly to public investors, rather than issuing new shares and conducting a fresh capital raise in the process, as is the case in a traditional IPO.

Roblox will be following into the footsteps of companies like Spotify (SPOT) and Slack (WORK), which also went public in the recent years via direct listings, shunning the typical IPO.

Roblox revenue

The company was last valued in the private market at $4 billion. This was after a funding round led by the venture capital firm Andreessen Horowitz in February last year that generated $150 million.

Over the past few years, Roblox’s daily active users have steadily grown and this growth surged during the pandemic with so many people stuck indoors and seeking out entertainment.

In 2020 alone, daily active users on Roblox grew by 85% to 32.6 million, almost doubling the 2019 growth rate that stood at 47%. Users’ hours engaged also more than doubled to 30.6 billion last year.

As it is with most companies around the world, Roblox’s user growth has led to major revenue growth for the company, increasing by 82% to about $924 million last year. However, net losses have also increased from $71 million in 2019 to about $253.3 million in 2020.

As a beneficiary of 2020’s stay-at-home orders, Roblox has already acknowledged that its spectacular growth rates will likely not be sustained going forward, if what it said in a February 22 filing is to go by.

“We have experienced rapid growth in the three months ended June 30, 2020, September 30, 2020, December 31, 2020, and for a portion of the three months ended March 31, 2020, due in part to the COVID-19 pandemic given our users have been online more as a result of global COVID-19 shelter-in-place policies,” the company said.

It added, “For example, our bookings increased 171% from the year ended December 31, 2019 to the year ended December 31, 2020. We do not expect these activity levels to be sustained, and in future periods we expect growth rates for our revenue to decline, and we may not experience any growth in bookings or our user base during periods where we are comparing against COVID-19 impacted periods.”

Roblox also recently issued guidance for Q1 and Q2 of FY2021 that will end in March and June respectively.

The company projected that daily active users may grow as much as 68% to 39.6 million, and revenue could grow as much as 85% to $335 million for the first quarter. The company also noted that this user growth would likely be only 9% over last year for the second quarter. However, revenue could still likely rise by as much as 86%.

Here is this week’s economic calendar

Monday: Wholesale inventories, month-over-month, January final (1.3% expected, 1.3% in December)

Tuesday: NFIB Small Business Optimism, February (96.3 expected, 95.0 in January)

Wednesday

  •  MBA Mortgage Applications, week ended March 5 (0.5% during prior week);
  • Consumer Price Index, month-over-month, February (0.4% expected, 0.3% in January);
  • Consumer Price Index excluding food and energy, month-over-month, February (0.2% expected, 0.0% in January);
  • Consumer Price Index year-over-year, February (1.7% expected, 1.4% in January);
  • Consumer Price Index excluding food and energy, year-over-year (1.4% expected, 1.4% in January);
  • Monthly Budget Statement, February (-$162.8 billion in January).

Thursday:

  • Initial jobless claims, week ended March 6 (725,000 expected, 745,000 during prior week);
  • Continuing claims, week ended February 27 (4.180 million expected, 4.295 million during prior week);
  • JOLTS job openings, January (6.600 million expected, 6.646 million in December);
  • Household change in net worth, 4Q ($3.817 trillion in 3Q).

Friday:

  • Producer price index, month-over-month, February (0.4% expected, 1.3% in January);
  • Producer price index excluding food and energy, month-over-month, February (0.2% expected, 1.2% in January);
  • Producer price index year-over-year, February (2.7% expected, 1.7% in January);
  • Producer price index excluding food and energy, year-over-year (2.6% expected, 2.0% in January);
  • University of Michigan Consumer Sentiment, March preliminary (78.0 expected, 76.8 in February)

Earnings calendar

Monday: StitchFix (SFIX), ContextLogic (WISH) after market close

Tuesday: MongoDB (MDB) after market close

Wednesday: Bumble (BMBL), Oracle (ORCL), AMC Entertainment (AMC) after market close

Thursday: DocuSign (DOCU), Ulta (ULTA), Poshmark (POSH) after market close.