Skillz Inc: Wall Street’s Lowest Projections See This Stock Rising 57%

SKLZ stockSkillz Stock Up 75% Year-Over-Year & Could Still Double

While 2020 was not a great time for many companies to go public, it was fortuitous for Skillz Inc (NYSE:SKLZ).

A mobile gaming stock, SKLZ stock began trading on the New York Stock Exchange on December 17, 2020. The calendar year was a short one for Skillz stock, but the company made good use of it, with the stock closing out 2020 up by approximately 12%.

That momentum carried into 2021. On February 5, SKLZ stock hit a record intra-day high of $46.30, for a year-to-date gain of 36.5%. But then bond yields rose and investors rotated from growth stocks to value stocks, and the entire tech sector took a breather.

According to Wall Street, investors took too much of a breather when it comes to Skillz stock. Currently trading at $17.47, SKLZ stock is down more than 60% from its February highs.

Advertisement

But Skillz Inc’s outlook is exceptional. And it’s better to find a beaten-down stock with great upside potential than to jump on the bandwagon and take a volatile, GameStop Corp. (NYSE:GME)-type ride to ruin.

Of the six analysts providing a 12-month price forecast for Skillz stock, the median target is $30.50, which represents a 78% gain from the current level. The high target of $34.00 is almost double the current price. Even the low target of $27.00 would represent a gain of 57.5%.

As you may know, Wall Street takes a conservative approach to forecasting. A more aggressive 12-month price forecast for SKLZ stock would be $42.00 per share, which represents a 140% increase from the current level.

There’s a good reason for that optimism. Skillz Inc’s fourth-quarter and full-year 2020 results topped analyst expectations. Its first quarter as a publicly traded company was its 20th consecutive quarter of revenue growth.

The company will be releasing its financial results for the first quarter on May 4, but it already warned the Street that it had outperformed analyst expectations.

Chart courtesy of StockCharts.com

SKLZ Stock Overview

Skillz Inc has been redefining mobile gaming.

Instead of blasting its users with ads and making them fork over money to advance in games, the Skillz platform allows gamers to compete against each other for cash and prizes. Skillz and independent game developers also get a cut of the prize. (Source: “Q4 2020 Investor Presentation,” Skillz Inc, April 1, 2021.)

The Skillz platform has more than 40 million registered users and hosts an average of more than five million daily tournaments (two billion annually), including 1.5 million paid-entry daily tournaments offering more than $100.0 million in prizes each month.

Playing mobile games by yourself is fun, sure, but playing against others is a lot more addicting. In 2020, Skillz gamers played an average of 60 paying user minutes every day. That’s more than twice the mobile gaming average of 26 minutes. It also dwarfs “TikTok” (52 minutes), “YouTube” (42 minutes), Candy Crush (38 minutes), “Facebook” (37 minutes), and “Snapchat” (30 minutes).

While the Skillz platform is home to thousands of games, there’s always room for more. In February, the company announced that it’s teaming up with the National Football League (NFL) to crowdsource a future mobile esport. (Source: “NFL and Skillz Sign Multi-Year Gaming Agreement,” Skillz Inc., February 4, 2021.)

As part of the agreement, Skillz and the NFL will host a global game developer competition to create an NFL-themed mobile game. The competition will launch in the second quarter of 2021.

Moreover, Jerry Bruckheimer, the veteran movie producer known for the Pirates of the Caribbean and National Treasure films, joined Skillz Inc’s board of directors in February.

Skillz Inc Outperformed 2020 Q4 & Full-Year Expectations

For the fourth quarter ended December 31, 2020, Skillz announced that its revenue increased 95% year-over-year to $68.0 million, which was eight percent higher than analysts were calling for. (Source: “Skillz Outperforms Fourth Quarter and Full Year 2020 Financial Results,” Skillz Inc, March 10, 2021.)

The company’s fourth-quarter gross profit grew by 95% year-over-year to $64.0 million and its gross margin was an eye-watering 95%. Skillz reported a fourth-quarter net loss of $44.0 million ($0.14 loss per share), compared to a 2019 fourth-quarter loss of $9.0 million ($0.07 loss per share).

“Our first quarter as a publicly traded company was our twentieth consecutive quarter of revenue growth,” said Andrew Paradise, CEO and founder. “We look forward to many more such quarters ahead.” (Source: Ibid.)

The company’s full-year 2020 revenue climbed 92% year-over-year to $230.0 million. Its full-year gross profit grew by 91% to $218.0 million, and its gross margin was 95%. Skillz reported a 2020 net loss of $122.0 million ($0.42 loss per share), compared to a 2019 net loss of $24.0 million ($0.09 loss per share).

Skillz ended 2020 with $263.0 million in cash, and zero debt.

Looking ahead, Skillz is projecting that its 2021 revenue will come in at $366.0 million, which represents year-over-year growth of 59%. Chances are good the company will raise that guidance. It already said that its first-quarter results outperformed analysts’ expectations.

Analyst Take

There are many mobile gaming companies out there. What sets Skillz Inc apart is its platform, which allows gamers to compete against each other for prizes and cash.

As mentioned earlier, the company is always adding new games to its platform and it recently inked a deal with the NFL. That should improve the company’s finances and increase the value of Skillz stock.