Eaton Dines on Data Center Demand

B.Riley analyst Drew Crum initiated coverage of Roblox (NYSE: RBLX) stock with a buy rating and a $125 price target this morning. “Roblox has built arguably one of the premier next-generation entertainment platforms,” writes Crum, and is “benefiting from two mutually reinforcing network effects, content and social, often drawing parallels to YouTube.”

Unimpressive Q3 earnings and “tepid near-term guidance” have depressed Roblox stock, but Crum insists Roblox should be “a core holding,” and he recommends “initiating or adding to positions following a -30% correction.” Over time, Crum expects Roblox to capture 10% or more of the global videogaming market. As that happens, he predicts 20% annualized growth in bookings (that’s sales of Robux, which convert to revenue and profit as they’re spent).

Roblox stock opened 0.4% lower despite the report, and still falling, already down more than 2%. Really, the whole market looks kind of depressed this morning, as investors await news of the Fed’s next interest rate move. The Vanguard S&P 500 ETF is still basically at 0.0% change from yesterday’s close.

Continuing with earnings news, popular pet food e-tailer Chewy’s (NYSE: CHWY) beat earnings by a couple cents this morning. Q3 profit was $0.32 per share and sales edged out forecasts at just over $3.1 billion.

CEO Sumit Singh said: “Chewy continues to outperform the pet category and expand market share, with profits once again growing faster than sales,” and momentum is building.

Management raised the floor on its sales and earnings guidance for the full year. Previously expecting $12.5 billion to $12.6 billion in sales, and an EBITDA margin between 5.4% and 5.7%, Chewy now says sales will be at least $12.58 billion, and margins at least 5.6%.

Chewy stock is up about 6.5% premarket.