A year after its all-time high, the Skillz Stock PriceSPAC craze’s poster child has plummeted 96 percent.
Competition from other mobile gaming platform companies is fierce, as is the macroeconomic climate, and these factors are putting pressure on the company’s bottom line.
The company’s financials are a catastrophe, with sales growth slowing substantially, spending soaring, and stock-based compensation spiraling out of control.
Despite its demise, the firm continues to be a good investment opportunity.
Investing Principle
Skillz Stock Price (NYSE: SKLZ) is a mobile gaming firm created by current CEO Andrew Paradise back in 2012. Flying Eagle Acquisition Corporation, a SPAC, merged with the company in 2020 to become Flying Eagle Holdings. With ARK Invest (ARKK) purchasing millions of shares, the business became the face of the SPAC mania.
From its SPAC price of $10 to nearly $40 in only a few months, the stock’s value surged. Skillz’s Stock Price plummeted as the initial frenzy died down and investors began to dump high-growth tech businesses in general. A year after hitting an all-time high, the price dropped 96% to $1.75 per share. In February, ARK Invest also sold all of its interests in Skillz.
Connecting game creators and gamers is what Skillz Stock Price is all about. In its games, the firm aims to provide a variety of social competitions. Every month, it holds billions of tournaments for millions of mobile gamers across the globe and awards millions of dollars in prizes.
The company’s business plan is fairly basic. Because of the enormous size of the video game industry, Skillz Stock Price earns money by taking a percentage of the entrance fees paid by players. In addition, it gets money via brand sponsorships and in-game advertising.
Mobile gaming accounts for $93 billion of the $180 billion TAM (total addressable market) for gaming, with a CAGR of 20% from 2016 to 2019. Although the stock has plummeted, I still think it’s a good idea to get out while the getting is good. The firm is now dealing with several challenges, including increased competition, the reopening of nations, and the prospect of a recession. The company’s finances are a complete disaster, with costs spiraling out of control.
There Are Several Obstacles To Your Way.
Skillz Promo Code is now facing several headwinds such as increased competition, nations re-opening, and the prospect of a recession. Despite the magnitude of the mobile gaming market, the sector is already highly consolidated, making it very difficult to break through the clutter.
When compared to bigger gaming firms such as Take-Two Interactive (TTWO) and Zynga (bought by Take-Two Interactive), smaller companies like Skillz Stock Price find it more difficult to generate a blockbuster game (EA). This group of firms is more well-established, and as a result, they can devote more funds to R&D as well as S&M. (sales and marketing).
For comparison, Take-Two Interactive spent $96.1 million on R&D in the most recent quarter, while Skillz’s Stock Price spent $18.7 million.
Added To That, There Are Challenges In The Broader Environment.
People returning to work, traveling, and eating out in real all lower the amount of time they spend playing mobile games and hence the amount of money they spend on in-game tournaments as a result. Additionally, the prospect of a recession will harm consumers’ motivation to participate in tournaments.
Consumer purchasing power has never been weaker, despite the historically low unemployment rate, thanks to the high pace of inflation that drives up the cost of everything. As a consequence, consumers are forced to spend more money on necessities, which cuts down on their discretionary income. As the macro-environment becomes even more unpredictable, they will be more inclined to conserve their money.
Financial And Valuation Information
Skillz Stock Price’s most recent financial results are dismal, with no signs of profitability in sight. The corporation made $93 million in sales in the first quarter of 2022, a 13% increase over the $84 million it made the year before.
The growth in paying monthly active users, which grew by 22% YoY (year over year) to 570,000, is partly responsible for this. From $79 million to $84 million, gross profit grew by 6%. Gross profit margin shrank by 400 basis points YoY as a result of the slower rise in gross profit relative to sales. For the second quarter and the whole year, sales growth is expected to continue to decline. Only a 4% increase in total income is expected for the whole year, according to the prediction.
However, despite the company’s continuous focus on profitability, this quarter’s results show little meaningful progress. It lost $(148) million in the third quarter, up from $(54) million a year earlier. About $65 million of the increase came from one-time stock-based compensation costs associated with rescinding previously issued performance stock units to the CEO. Weirdly, the CEO continues to be compensated with stock even after the company’s performance stock units have been canceled. Even The net loss will grow by 54% even if we subtract $65 million.
Conclusion
As a result, I do not believe that Skillz’s Stock Price is a good investment at this time. When it comes to gaming, Skillz Stock Price is not the firm to put your money on. Investing in a firm with a management team that has a track of underdelivering is something I am hesitant to do, despite the company’s important partnerships with the NFL and UFC.
Competition is highly severe as well with big game developers spending considerably on R&D and S&M to secure their dominant position. Additionally, macroeconomic headwinds like re-openings and inflation will have an influence on Skillz Stock Price since the government is no longer dishing out stimulus payments. The financial situation of the business is dire.
Growth is expected to slow down over the next few years. The CEO’s stock-based pay is out of control, and the company’s costs are spiraling out of control. The company’s net loss continues to grow despite the lack of profitability, and the number of shares outstanding continues to rise, diluting the company’s current stockholders. Because of this, I feel the stock should be sold.
