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S&P 500   3,853.13
DOW   31,157.56
QQQ   323.57
S&P 500   3,853.13
DOW   31,157.56
QQQ   323.57
S&P 500   3,853.13
DOW   31,157.56
QQQ   323.57
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Skillz Inc (NYSE:SKLZ) Stock a Buy: An Esports Platform with Upside

Wednesday, January 13, 2021 | Sean Secular
Skillz Inc (NYSE:SKLZ) Stock a Buy: An Esports Platform with Upside

With the multifaceted ways that technology continues to become integrated into our daily lives, entirely new industries are emerging. This is a trend that should continue as time goes on and reward investors that stay ahead of the curve. For example, there’s a new rapidly growing industry related to video games that investors should be paying attention to. We’re talking about e-sports, which is on track to surpass $1.5 billion in revenue by the year 2023.

If you aren’t familiar with esports, it is a form of sport competition that uses video games. These multiplayer video game competitions attract tons of viewers and allow gamers to compete at the professional level for huge cash rewards. This is a burgeoning industry with tons of potential, especially since we know how infatuated younger generations are with video games. That’s why investors should be looking to buy a company like Skillz Inc (NYSE:SKLZ) at this time, as it’s the first publicly-traded mobile esports platform. Let’s take a deeper look at Skillz Inc below.

Leading Mobile Gaming Platform

Skillz Inc is an interesting business to watch for several reasons. The company is focused on mobile gaming, which many believe is the future of esports as it will reduce barriers for entry and allow more people to gain exposure to the industry. The Skillz platform is used to host and operate gaming tournaments for thousands of game developers. It hosts billions of casual esports tournaments for mobile players all over the world and distributes millions of dollars in prizes each month to the winners of these tournaments.

It’s easy to see why Skillz is such a unique business that is disrupting the gaming industry. Game developers want their games on the company’s platform as it can help them to grow their brand and create potentially massive franchises thanks to the social competition that the platform provides. The company claims that its platform enables developers to monetize their content five times better than ads or in-app purchases. Gamers are also interested in the company’s platform, as it reportedly has over 40 million users at this time.

SPAC Merger and Q3 Top Line Growth

Skillz is another company that has recently pursued going public via a SPAC reverse merger. The company was combined with special purpose acquisition company Flying Eagle Acquisition Corp (NYSE:FEAC) back in December and the stock has been off to a hot start. Since it began trading on December 17th under its new ticker symbol, the stock is up over 38%. As a reminder, SPACs provide an easy path to a public listing for companies that want to avoid market or pricing risks.

The company reported its Q3 and Nine Months year-to-date financial results back in November that confirm Skillz is seeing strong top-line growth. Q3 revenue was up 92% year-over-year to $60 million and the company has generated $162 million in revenue year-to-date, a 91% increase over the prior year. Like most early-stage growth companies, Skillz is reporting net losses, but the top-line growth is certainly impressive. Another interesting tidbit from the earnings report was that Skillz is forming some smart relationships with celebrities and nonprofits to strengthen its brand. The company recently hosted a celebrity tournament offering and held fundraisers for leading nonprofits like the American Cancer Society, which could end up paying off for early investors of the company if Skillz becomes more popular as a result.

Final Thoughts

The mobile gaming and esports industry is exploding at this time, and Skillz Inc is a company that is well-positioned to take advantage. Investors should note that there are a few strong growth drivers that could help this company grow its earnings and user base substantially over the next few years, including sponsorships, international expansion, advertising revenue, and a steady supply of new games on its platform.

The stock received a nice boost this week after well-known fund manager Cathie Wood’s ARK Next Generation Internet ETF (NYSEARCA:ARKW) announced a new position in the company. The stock has also received several analyst upgrades this week, confirming that the company is gaining more exposure among investors. The bottom line here is that Skillz Inc offers exposure to an industry that has a lot of room to grow and is a company that could be a household name sooner than you think.

Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Skillz (SKLZ)1.6$29.23+9.6%N/AN/ABuy$27.67
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This too shall pass. Those four words should be taped to the computer screen of every investor. If you own shares of the tech sector, you’ve seen your portfolio take quite a hit. Tech stocks were largely immune from the effects of the pandemic.

However, as investors are looking to rebalance their portfolios, tech stocks were obvious targets for some profit-taking. And at the end of the day, that’s what I believe the latest tech selloff amounts to. Stocks don’t move in one direction all the time. Sure, there may be some saber-rattling about breaking up big tech. But with an election in less than two months, nobody will have the political will to do anything.

That doesn’t mean that it’s all going to be smooth sailing. Sure, the Federal Reserve did its part by promising low-interest rates until the end of time (or at least through 2023 whatever comes first). But the rest of 2020 is likely to be volatile for stocks.

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And we have an election. But we are not likely to know the winner of the election on election night. In fact, for those who remember the spectacle of “hanging chads”, this election could make that one look like amateur hour.

The bottom line is there will be uncertainty. But there are always gains to be found, particularly now that their stock price has come down a little bit. Here are seven tech stocks that you can look to add or increase a position in now that they’re trading at a discount.

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