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Esports stock Skillz Inc (US:SKLZ) has been making headlines this Easter weekend; recently its CEO and founder, Andrew Paradise, disclosed that he had made a significant share purchase in the trading window post fourth-quarter earnings.
The news of the purchase sent shares soaring by 24.46% on Thursday, prior to the long weekend.
Skillz is a San Francisco-based competitive multiplayer mobile video game platform that allows users to compete in a number of global competitions against other players.
The transactions were initially spotted on Fintel’s latest CEO purchases page, late on Thursday evening.
Despite the rally, Skillz shares are trading well below the initial SPAC merger price of $10 last seen in mid-2020 and significantly below its all-time high of $46 hit in February of 2021.
In the filing, Andrew Paradise disclosed that he purchased 1.5 million shares on Wednesday at 55.75 cents per share, slightly above the stock’s lowest point in its short history. The transaction was worth a total of $836,000 and is the only insider purchase made in the stock over the last year.
Investors were pleased to see the Skillz CEO purchasing the company’s shares with his own capital, as it demonstrated his commitment to the business and belief in its growth potential.
Fintel’s insider sentiment quant score of 87.29 is bullish on SKLZ shares as it ranks the company in at number 215, or in the top 1.5%, of 14,947 globally screened companies for the highest levels of insider buying activity.
Paradise’s purchase equated to 0.503% of the total share float and boosted his equity stake to about 2.55% in the company.
Post-Pandemic Weakness
For some comparison, the stock has experienced weak and declining institutional interest since its peak early in the Pandemic. This is illustrated by Fintel’s bearish fund sentiment score of 14.60, which ranks the stock in the bottom 5% out of 36,459 screened securities. The model incorporates the total number of owners, changes in portfolio allocations and other metrics.
Filings show 305 institutions own 155.75 million shares of SKLZ stock. Some of the largest shareholders include ARK Investment Management, Atlas Venture Associates, Wildcat Capital Management, Renaissance Technologies, Geode Capital Management and Coastal Bridge Advisors.
For the Final quarter of 2022, Skillz reported a 57% decline in revenue to $46.9 million, slightly missing market consensus expectations.
Adjusted EBITDA losses narrowed significantly from $79.5 million in the final quarter of 2021 to a loss of $9.5 million in 2022 as total costs and expenses were reduced significantly. The result was better than expected.
On the bottom line, net losses widened from $100.4 million to $143.5 million as a result of a significant goodwill impairment worth $117 million during the quarter. The result equated to a loss of 34 cents per share, almost 3x worse than analysts expected.
On the March 30 conference call, SKLZ’s President Jason Roswig said, “We had a very successful effort in gradually reducing our user acquisition spend to a level that we believe will prepare us for profitable growth going forward.”
Profitability Progress
Wedbush analyst Michael Pachter highlighted in a report post results that he believes the esports company is continuing to make progress on its path to profitability. The analyst is forecasting revenue and adjusted EBITDA to stay relatively stable over the next few quarters and maintained his $3.75 target price and ‘outperform’ call on the stock.
Wedbush is one of the more bullish analysts in the market with other firms having a ‘hold’ or ‘sell’ view on the stock. Fintel’s consensus target price of $0.95 suggests analysts think the stock could recover a further 39% this year.
A chart from Fintel’s forecast page for SKLZ shows market sales expectations for the next five years. Analysts’ on average expect sales to continue to moderate over 2023 before returning to a path of growth from 2024 onwards.
With SKLZ’s share price down 74% over the past year, the move has been seen as a positive development for the stock, however it is still too early to confirm if the stock’s medium-term momentum trend has changed yet. For comparison, the 52-stock exchange-traded fund Pacer BlueStar Digital Entertainment ETF (US:ODDS), is up less than 1% in the same 12 month period. SKLZ shares make up 0.58% of the fund’s gaming, gambling and digital entertainment stocks portfolio.
This article originally appeared on Fintel
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After Skillz (SKLZ 0.56%) enjoyed a post-earnings pop at the end of last week, investors cooled on the stock Monday. Its price rose less than 0.6% on the day, trading essentially in line with the forgettable bump of the S&P 500 index. A fresh analyst take on the company helped dampen enthusiasm.
Before market open, Stifel analyst Drew Crum cut his price target on Skillz stock. Crum’s new evaluation places the fair value of the shares at $1.25 apiece, down from his previous level of $1.50. This move doesn’t make him a Skillz bear, however, as he maintained his buy recommendation on the specialty tech sector stock.
The reasoning behind the prognosticator’s move wasn’t immediately apparent. He wasn’t, however, the only pundit getting less enthusiastic about Skillz in the wake of the company’s latest earnings release last Thursday.
Almost immediately following that event, BTIG analyst Clark Lampden also did the price target cut dance with a more drastic reduction. He now feels Skillz is worth only $0.40 per share, well below his preceding target of $0.71. He’s more gloomy on the company’s prospects than his Stifel peer; he kept his existing sell recommendation intact.
Investors found enough to like in that results announcement from Skillz to subsequently push its price higher on Friday. While the company’s $0.34 per-share loss for its fourth quarter was notably worse than the average analyst estimate and revenue also fell short, several key operational metrics ticked higher. Among these was both the average revenue and average gross marketplace volume (GMV) per monthly active user.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Skillz. The Motley Fool has a disclosure policy.
In this video, I review Skillz‘s (SKLZ 10.86%) latest earnings report and highlight a massive change investors should welcome.
*Stock prices used were the afternoon prices of March 30, 2023. The video was published on April 1, 2023.
Parkev Tatevosian, CFA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Skillz. The Motley Fool has a disclosure policy.
Parkev Tatevosian is an affiliate of The Motley Fool and may be compensated for promoting its services. If you choose to subscribe through fool.com/parkev, he will earn some extra money that supports his channel. His opinions remain his own and are unaffected by The Motley Fool.
It’s easy to invest in the stocks that everyone loves, but the truly life-changing returns can happen when an investor goes against the crowd, picking an unpopular stock, and ends up being right. Gaming platform company Skillz (NYSE:SKLZ) isn’t a market favorite; the stock is down more than 70% from its 52-week high set earlier this year. However, three things could really change the story on Skillz for the better.
Skillz is in the very early stages of developing its platform, and its content is minimal. The games on the platform are largely “casual games,” such as solitaire, pool, and bingo. Gamers play a game, and the Skillz platform compares their score against their opponent’s to determine the winner of the match. There is no ability to play against someone in real time, eliminating many of the most popular game genres such as battle royal and first-person shooter.
The company recently announced a minority investment of $50 million and a strategic partnership with Exit Games, the developer of Photon, a platform that powers multiplayer games for nearly 600,000 developers worldwide. Game developers can now use Photon to create games on the Skillz platform, fully unlocking the mobile gaming market estimated at $86 billion as of 2020.
Image Source: Getty Images
Being able to expand in different directions is an underrated factor in how a company performs. Skillz can grow both within and outside of mobile gaming. CEO Andrew Paradise has explicitly outlined the long-term plan to enter new markets including education and fitness. These milestones won’t come to pass overnight, but the “blueprint” has been laid by management. Investors will need to monitor developments on real-time games and new markets over the next two or three years to see how Skillz executes.
Skillz currently generates less than 10% of its revenue from users outside North America, despite the international gaming market being four times larger than the United States’. Skillz grew its revenue 52% year over year in 2021 Q2, so without this large international opportunity, Skillz has still managed to continue rapidly growing its business.
The company’s first international expansion effort will be in India, which Paradise says will launch by the end of 2021. India is the second-most-populous country on Earth, with almost four times the population of the US. Economic growth in India is expected to spur its gaming industry, growing the country’s gaming market to 657 million users by 2025. Skillz could be entering this market at the perfect time, and the sheer size of India represents tremendous upside considering the growth that Skillz has achieved with casual games in an isolated domestic market.
Considering the India launch is coming at the end of the year, investors can probably begin to look for a financial impact on revenue toward the end of 2022, as Skillz could take some time to gain and retain users in a brand-new market. After that Skillz plans to expand, gaining offices in parts of Asia and Europe from its acquisition of Aarki.
Brand partnerships will also aid Skillz’s efforts to acquire new users by partnering with key brands that will help market the company. In this regard, the first major domino was announced in February when Skillz and the NFL agreed to partner on a developer challenge that would see games developed and launched on Skillz’s platform.
Management noted during 2021 Q2 earnings that the developer challenge is currently down to 14 semifinalists who are now developing their games for judging. Skillz will launch the winning game(s) in time for the 2022 NFL season (Q3 of 2022). The NFL partnership is a huge opportunity for Skillz to demonstrate its value to big brands, and success could inspire future partnerships.
Skillz currently trades at a price-to-sales (P/S) ratio of 11 using management’s full-year revenue guidance of $376 million for 2021, and has a meager $4.6 billion market cap. Skillz had a P/S higher than 40 and a $16 billion market cap in February, which shows just how far the stock has fallen.
The company’s addressable market will likely expand well beyond $100 billion by the end of the decade from the growth of mobile gaming alone; it has grown at a rate of 23% since 2015. Additionally, new categories such as fitness and education could significantly broaden the horizon for Skillz.
At just a $4.6 billion market cap, Skillz could grow to multiples of its current size over the rest of this decade, depending on how well the company executes on these growth opportunities. There’s the risk that things won’t work out, but the upside, if things do work, could make patient investors very wealthy.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
Shares of Skillz (NYSE:SKLZ) are falling today, down by 5% as of 12:51 p.m. EDT. The mobile esports platform provider will be reporting second-quarter results after the market close. The stock is down almost 30% year to date.
Wall Street is cautiously optimistic about Skillz’s potential, with five of the nine analysts covering the company rating it a buy. The rest rate it a hold. The consensus price target for the stock is $24.31 per share for the next year, implying almost 80% upside, but the current quarter might be tricky.
Analysts still expect Skillz to lose $0.11 per share in Q2, and while management didn’t provide quarterly guidance, it has forecast full-year revenue will grow 63% to $375 million.
Image source: Getty Images.
Esports is one of the fastest-growing niches, and as the economy continues to reopen, more in-person gameplay, contests, and tournaments will take place. There may be some hesitancy on the part of the market over how the coronavirus variants will impact Skillz’s business, as the U.S. Centers for Disease Control is calling for even vaccinated individuals to wear masks indoors once again.
Whatever the short-term impact the current situation may have on Skillz’s quarterly report, it still appears the long-term outlook for its esports business remains bright.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
Skillz (NYSE:SKLZ) has been a battleground stock ever since its public debut last December. The gaming service company’s stock opened at $17.89 a share on the first day of trading, surged to $46.30 in February during the “meme stock” frenzy, and then tumbled all the way back to the mid-teens.
Let’s see why Skillz has attracted so much attention from the bulls and bears, and where its volatile stock could be headed.
Skillz didn’t go public through a traditional IPO or direct listing. Instead, it agreed to be acquired by a publicly traded SPAC (special purpose acquisition company) called Flying Eagle Acquisition Corp. Flying Eagle’s investors received new shares of Skillz after the merger closed.
Image source: Getty Images.
SPAC-backed IPOs often attract a lot of attention and scrutiny. The bulls claim they democratize the IPO process by letting retail investors buy shares of a publicly listed SPAC before it merges with a privately held target. In theory, that process prevents institutional investors from hoarding IPO shares.
The bears will point out SPACs are blank-check companies that don’t have any real value unless they find a takeover target within a two-year time limit. That pressure could cause SPACs to make premature acquisitions or dress up weak businesses as strong ones. Several prolific short-sellers, including Wolfpack Research, have made similar accusations against Skillz.
Wolfpack’s attack on Skillz in early March, along with an opportunistic secondary stock offering at $24 a share later that month, ended its Reddit-fueled rally. But in April, the famed growth investor Cathie Wood bought shares of Skillz for two of her ARK exchange-traded funds (ETFs) and denounced Wolfpack’s allegations as “exaggerated or incorrect” in an investor newsletter.
Today, Skillz accounts for 2.08% of the ARK Next Generation Internet ETF (NYSEMKT:ARKW) and 1.08% of the ARK Innovation ETF (NYSEMKT:ARKK). However, Wood’s support still couldn’t prevent Skillz from slipping below its initial opening price over the following months.
Skillz’s online platform hosts multiplayer games and tournaments for other companies. The bulls believe this approach is disruptive since it enables smaller game developers to easily integrate multiplayer and competitive features without building those services from scratch.
Skillz’s growth rates support that thesis. Its revenue rose 92% to $230 million in 2020, and it expects 63% growth this year. Analysts expect its revenue to rise another 46% to $551 million in fiscal 2022.
However, Skillz’s net loss widened from $24 million in 2019 to $122 million in 2020, and analysts expect it to remain unprofitable for the foreseeable future. Skillz’s losses raise red flags since it already retains a 50% cut of all revenue from its hosted games. Most other mobile app stores only retain a 15%-30% cut of an app’s earned revenue, so Skillz doesn’t have much room to raise its rates.
Skillz also relied on just three games from two studios (Big Run and Tether) for 79% of its revenue in 2020. Its total monthly active users (MAUs) grew just 4% year over year to 2.7 million during the first quarter of 2021. Those numbers suggest Skillz isn’t as disruptive as the bulls would like to believe.
On the bright side, Skillz’s number of paid MAUs rose 81% to 467,000 during the quarter, its average revenue per paid user grew 7% to $60, and its total average revenue per user jumped 86% to $10.35.
Those growth rates suggest the stickiness of Skillz’s platform could lock in its top games and players even if its overall MAU growth stalls out. Those strengths could also help Skillz maintain its pricing power.
Skillz also recently agreed to buy Aarki, an in-game advertising platform that reaches over 465 million MAUs. This purchase could strengthen Skillz’s own digital advertising ecosystem, which monetizes the MAUs who don’t participate in its paid tournaments, and attract more mobile game developers.
Skillz trades at 16 times this year’s sales, which makes it cheaper than many other high-growth tech stocks, but that lower price-to-sales ratio reflects the company’s uncertain future.
I personally wouldn’t buy Skillz, since its decelerating MAU growth, high fees, widening losses, and customer concentration issues are tough to ignore. However, I fully expect Skillz to remain a headline-dominating stock as the bulls and bears clash over its strengths and weaknesses.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
