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Roblox goes public, inflation data: What to know in the week ahead

Emily McCormick
·Reporter
·8 min read
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This week, investors will be eyeing new inflation data, which will offer a look at whether prices have already begun to creep up as some have feared ahead of a major economic reopening. A highly anticipated direct listing for the video game company Roblox is also on deck.

On Wednesday, the Labor 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 anticipate that the CPI accelerated to see a 0.4% month-over-month increase in February, up from the 0.3% monthly rise in January, according to Bloomberg-compiled data.

Over last year, the CPI likely rose by 1.7%, picking up from the 1.4% rise in January. But excluding more volatile food and energy prices, the CPI is expected to have risen 1.4% year-over-year to match its January increase, since a jump in energy prices during the harsh winter weather last month likely contributed much of the gain.

Still, the possibility of an upside surprise in consumer prices gains has left investors jittery, with many market participants bracing for inflationary pressures to pick up rapidly later this year as more businesses reopen and many consumers start to release their pent-up savings during the pandemic.

"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," Nomura chief economist Lewis Alexander wrote in a note Friday.

"We expect relative price changes between goods and services to exert modest inflationary pressure going forward," he added. "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 Chairman Jerome Powell holds a press conference following a two day Federal Open Market Committee policy meeting in Washington, U.S., January 30, 2019. REUTERS/Leah Millis     TPX IMAGES OF THE DAY
Federal Reserve Chairman Jerome Powell holds a press conference following a two day Federal Open Market Committee policy meeting in Washington, U.S., January 30, 2019. REUTERS/Leah Millis TPX IMAGES OF THE DAY

Federal Reserve 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 2020's highly depressed inflationary prints. For years preceding the pandemic, inflation had held well below the Fed's 2% target, as measured by core personal consumption expenditures (PCE). The Fed has signaled 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.

But investors' fears that the Fed may be under appreciating a possible surge in inflation has begun to mount 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 it has telegraphed as of late.

"It is the inflation profile once reopening begins in earnest that should be of most interest," RBC Capital Markets economists wrote in a note Friday. "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 2Q and for the balance of 2021 thereafter," he added.

Roblox hits the public markets

Meanwhile, the video game company Roblox is set to make its public debut this week, in one of the latest high-profile, public facing companies to hit the public markets.

Roblox's direct listing is set to take place on the New York Stock Exchange on Wednesday under the ticker symbol "RBLX." The move comes after the company delayed its public offering late last year amid a wave of exuberance in markets following Airbnb's (ABNB) and DoorDash's (DASH) IPOs.

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 initial public offering. Companies including Spotify (SPOT) and Slack (WORK) also went public in recent years via direct listings, eschewing the typical IPO.

Roblox was last valued in the private market at $4 billion, following a $150 million funding round led by the venture capital firm Andreessen Horowitz in February last year.

Roblox daily active users have accelerated over the past couple years, and especially so during the pandemic with so many people stuck indoors and seeking out entertainment. Daily active users on Roblox grew by 85% to 32.6 million in 2020, accelerating from a 47% growth rate in 2019. Users' hours engaged also more than doubled to 30.6 billion last year.

That user growth has translated to major revenue growth for the 17-year-old company, which increased by 82% to about $924 million last year. Net losses have also widened, however, increasing from $71 million to about $253.3 million from 2019 to 2020.

 Alice Wilkinson (7) adds a face mask to her character on the game 'Roblox' at her home in Manchester, as the spread of the coronavirus disease (COVID-19) continues, Manchester, Britain, April 5, 2020. REUTERS/Phil Noble
Alice Wilkinson (7) adds a face mask to her character on the game 'Roblox' at her home in Manchester, as the spread of the coronavirus disease (COVID-19) continues, Manchester, Britain, April 5, 2020. REUTERS/Phil Noble

As a beneficiary of 2020's stay-in-place orders, Roblox has already acknowledged that it's meteoric growth rates will likely not be sustained going forward.

"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 in a February 22 filing. "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 the first and second quarters of this year, or for the three months ending in March and June, respectively. For the first quarter, 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 second quarter, however, daily active user growth will likely grow as much as only 9% over last year, though revenue could still likely rise by as much as 86%, Roblox said.

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

  • Friday: N/A

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter: @emily_mcck

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