Is Skillz a buy?

It’s time to talk about a smaller name. Here is the breakdown on $SKLZ, otherwise known as Skillz.

Current Price: $35.58

52/Wk High: $46.30

52/Wk Low: $9.81

Market Cap: $13.21 Billion

Read below for the breakdown!

Skillz ($SKLZ) is a major mobile gaming platform that connects gamers in a social aspect. Not only that, but Skillz helps gaming developers build gaming franchises by creating a socially competitive segment of developers new games.

Furthermore, Skillz is a leading esports participant, hosting billions of tournaments worldwide and drawing gamers in through the use of monthly prizes.

Given the extreme growth of the gaming industry, investors have been upbeat on Skillz, with the stock moving over 80% to the upside on a year to date basis, leaving investors wondering if Skillz is still a buy.

In recent news, Skillz signed an agreement with the NFL. The agreement will bring both the NFL and Skillz together to host a game developer challenge, where developers will work to create an NFL mobile game and use Skillz esports and social platforms. Most importantly, the deal will give Skillz access to millions of new NFL fans as customers.

Not only has Skillz partnered with the NFL, but the company also maintains agreements with Marshawn Lynch, Floyd Mayweather, and Bowlero, the owner of the Professional Bowlers Association.

Digging into the numbers Skillz delivered solid Q3 2020 earnings results with revenues growing a strong 92% to $60 million. The quarters growth marks the 19th consecutive quarter of revenues growth.

As for gross profit, Skillz’s gross profit increased by 92% to a strong $56.9 million. For comparison, the Q3 2019 gross profit level was $29.6 million. Gross margin was strong as well, totaling 95% throughout Q3.

On the downside, Skillz continued to run at a net loss, reporting a total net loss for Q3 of $42.9 million, a higher net loss than the same time 2019 level of $5 million.

Back to the positives, gross marketplace volume (GMV) increased 76% to a strong $411 million, much better than the same time 2019 level of $234 million.

Management was upbeat about the quarter.

“The engagement we see from the players on our platform validates the connection they’re making with the community through competition,” CEO Andrew Paradise said.

When it comes to guidance, Skillz management is positive and affirmed guidance that the company will turn out $225 million in revenues for FY 2020.

Shifting into the balance sheet the numbers are solid.

Long Term Debt: None

Total Liabilities: $40.653 Million

Total Assets: $86.881 Million

Cash & Cash Equivalents: $56.861 Million

On a valuation basis, Skillz does trade at a premium and currently trades at a price to sales ratio of 53.33x.

Given the numbers the analysts are bearish, with a mean price target of $29.80/share, representing a -18.86% downside.

It is also important to note that the high price target is $34.00/share, representing a -7.43% loss, while the low price target is $27.00/share, representing a -26.48% downside.

The big money is also not as involved, with 41.93% of Skillz being owned by institutions. Top holders include Atlas Venture, Morgan Stanley Investment Management, and Wildcat Capital Management.

On a technical basis, Skillz is currently pulling back after a major rally. According to the six-month charts the MACD recently crossed back to the downside within a range of 3.99 down to 3.51.

The six-month charts are also indicating an RSI of 57.2 and CCI of 27.32, both of which are declining.

In short, Skillz is a solid company with consistent revenue growth, a growing market, and strong lineup of agreements, all of which will likely lead the company to further success.

EAT - SLEEP - PROFIT

Disclaimer: This is not direct financial advice, simply an opinion based on independent research.