Skillz Is Swinging to Profitability and Deserves to Rally
InvestorPlace - Stock Market News, Stock Advice & Trading Tips The beatdown of SKLZ stock has been relentless, but it has created an opportunity as Skillz is on surprisingly solid...
Here’s something I’ll bet you didn’t know. After its merger with special purpose acquisition company (SPAC) Flying Eagle Acquisition, Skillz (NYSE:SKLZ) became the first publicly traded mobile e-sports platform. Despite this notable historical tidbit, SKLZ stock remains roundly unloved on Wall Street.
It wasn’t always that way. During the heady days of early 2021, a Reddit rampage seemingly propelled Skillz’s share price to breathtaking heights. That lasted for a short while.
However, that was then and this is now. The technical damage done to SKLZ stock, as we’ll see in a moment, could take all of 2022 to repair.
On the other hand, value hunters can see the proverbial glass as half-full. As Skillz expands its market presence into a highly populated nation – and at the same time, firms up its financial results – perhaps investors will finally give this gaming-market upstart another chance.
A Closer Look at SKLZ Stock
Suffice it to say that it takes skill to invest profitably in Skillz. Early in 2021, those shorting the stock were absolutely steamrolled as social-media traders propelled SKLZ stock to a peak of $46.30.
Just like in a game of musical chairs, however, the last ones to make a move ended up losing. Folks who chased the stock in the mid-$40s were soon punished for their error and were never given a chance to get back to break-even.
By early January 2022, SKLZ stock had fallen to $6 and change. In its history, this stock had never been that cheap.
So are we looking at a toxic asset or a ripe buying opportunity? That depends on whether Skillz has strong turnaround prospects – and financially speaking, the company is indeed turning around.
Profits at Long Last
Ever since Skillz released its third-quarter financial results, investors have relentlessly dumped their SKLZ stock.
Really this wasn’t an overreaction to bad news. Rather, it was (in my humble opinion), an incorrect reaction to generally positive news. Granted, Skillz did cough up some capital to acquire multiplayer synchronous game engine Exit Games and advertising platform Aarki during Q3. Yet those acquisitions could prove to be valuable to Skillz and its stakeholders in the long term.
Besides, investors do not need to worry as Skillz is generating healthy revenue. Specifically, the company reported $102.1 million of Q3 revenue, representing a 70% year-over-year jump.
And here’s what might be the best part. For Q3, Skillz reported $50.78 million of net income. That’s a major improvement over the $42.85 million net loss from the same quarter a year earlier.
Capturing an International Opportunity
Even after Skillz swung from a bottom-line loss to a profit, the company isn’t idly celebrating its victory. Instead, Skillz is moving forward as a global business with a push into the vast, densely populated nation of India.
To be more specific, Skillz recently announced the company’s launch in India with a live pilot for video-game players.
Players in India, according to Skillz, will be able to use rupees (the country’s currency) to play the company’s free-to- download game, Diamond Strike Moreover, Skillz intends to collect feedback from players and other insights from this pilot launch, in order to improve the pay-to=play experience before expanding it to additional games.
This could be just the beginning of a much larger global venture for Skillz. Launching in India with Diamond Strike, as Skillz explains, is an “important step on the journey to capturing the international revenue opportunity.”
The Bottom Line
Now that the hype-fueled game of musical chairs has passed, SKLZ stock is trading at relatively low levels. So will you catch the proverbial falling knife? It’s your decision to make, but there’s no denying that Skillz is moving in the right direction, financially speaking.
Besides, Skillz, with its global ambitions, is in growth mode . In the final analysis, it doesn’t require great skills to invest in Skillz; you can just hold some of its shares and let the games begin.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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