Skillz Inc – Merged with Flying Eagle Acquisition Corp

Skillz Inc (NYSE: SKLZ) is the provider of an online mobile gaming platform that can be integrated into iOS and android games.

Investment Highlights - Skillz Inc – Hold at USD 26.31

• The Company had shown an increasing trend in total revenue and gross profit during Q3 FY20 and 9M FY20, compared to an equivalent period of the prior year.
• The Gross Marketplace Volume (GMV) grew by 76% in Q3 FY20 compared to Q3 FY19.
• The mobile gaming market is expected to increase by more than 100% to USD 150 billion by 2025.
• From a technical standpoint, the Company is trading higher than the 20-day simple moving average of USD 20.88, which indicates further upside potential in the stock.

Key Risks

• The Company is exposed to cybersecurity risk regarding data breaching. It is also exposed to compliance risk.
• The risk of lockdowns and restrictions may persist for an uncertain duration of time impacting the earnings of the Company.

Recent Developments

On 16 December 2020, the Company had updated regarding the completion of its merger with Flying Eagle Acquisition Corp. The transaction consisted of USD 849 million in funding from investors like Franklin Templeton, Fidelity, Wellington and others. The combined entity started trading on NYSE under the ticker SKLZ effective 17 December 2020.

Financial Highlights (for Q3 FY20 ended on 30 September 2020 as on 18 November 2020)

(Source: Company result)

• The revenue of the Company grew by 92% to USD 60 million during Q3 FY20, while it was USD 31.2 million during Q3 FY19.
• Similarly, the gross profit also increased by 92% to USD 56.9 million during Q3 FY20 compared to USD 29.6 million during Q3 FY19.
• The Company had reported a net loss of negative USD 42.85 million for Q3 FY20.
• The Gross Marketplace Volume had increased by 76% to USD 411 million during Q3 FY20 compared to USD 234 million during Q3 FY19.
• The Company had Cash & Cash Equivalent of USD 56.86 million as of 30 September 2020.

Share Price Chart (from 27 April 2020 to 13 January 2021)

 (Source: Refinitiv, chart created by Kalkine Group)

The Company was trading under ticker “FEAC” before 17 December 2020. 

Conclusion

The Company had completed its merger with Flying Eagle Acquisition Corp on 16 December 2020, and it became the first NYSE listed mobile esports platform. The combined entity had USD 250 million of cash balance and no debt on its balance sheet. The Contribution during Q3 FY20 had grown by 177% to USD 19.1 million. The Company had a large scope of growth in future as it had only a small proportion of the world’s total 2.7 billion gamers on its platform. The Company had significant opportunity to penetrate the international market as the international market is four times larger than the North American market. On the technical front, the Company is trading higher than the 20-day simple moving average of 20.88, indicating an upside potential in the stock price. The stock made a 52-week low and high of USD 9.81 and USD 27.49, respectively.

Based on its decent financial position and bright growth prospects, we have given the "Hold" stance on Skillz Inc at the closing market price of USD 26.31 (as on 13 January 2021), while we will recommend fresh buying when the merged entity starts showing positive results.

Clean Energy Fuels Corp

Clean Energy Fuels Corp (NASDAQ: CLNE) is the provider of natural gas as an alternative fuel for the transportation market in the United States and Canada.

Investment Highlights - Clean Energy Fuels Corp – Hold at USD 10.41

• The Company had reported higher station construction sales of USD 8.8 million during Q3 FY20 compared to USD 6.4 during Q3 FY19.
• Regarding the profitability, the adjusted EBITDA grew by 29.4% during Q3 FY20 compared to an equivalent period of the prior year.
• The stock price had generated lucrative returns of around ~286% in last three months.
• From a technical standpoint, the Company is trading higher than its 20-day simple moving average of USD 7.97, which indicates further upside potential in the stock.

Key Risks

• The Covid-19 pandemic may result in reduced activity levels and postponement of projects.
• The Company is exposed to the risk of fluctuating oil prices.

Recent Developments

On 21 December 2020, the Company announced its plans to collaborate with BP Products North America Inc to develop and operate new renewable natural gas (RNG) facilities at dairies and other agriculture facilities.

On 15 December 2020, the Company had announced new RNG contracts of more than 58 million gallons to meet the rising demand of carbon-neutral fuel from several business segments such as public transit, solid waste and heavy-duty trucking.

Financial Highlights (for Q3 FY20 ended on 30 September 2020 as on 05 November 2020)

(Source: Company result)

• The Company had delivered a 4.8% decline in total revenue to USD 70.9 million during Q3 FY20 compared to USD 74.4 million during Q3 FY19 due to lower effective fuel prices and volumes
• The Company had shown improvement in net loss and reported negative USD 2.3 million during Q3 FY20, while it was negative USD 4.3 million during Q3 FY19.
• The Company had reported adjusted EBITDA of USD 11.0 million during Q3 FY20 compared to USD 8.5 million during Q3 FY19.
• The Company had around USD 91.6 million of cash and cash equivalent as of 30 September 2020.

One Year Share Price Chart

 (Source: Refinitiv, chart created by Kalkine Group)

Valuation Methodology: EV/Sales Approach (NTM) (Illustrative)

Conclusion

The Company had delivered 97.7 million gallons of CNG and LNG during Q3 FY20. The Company had announced its collaboration with BP to make more carbon-negative fuel available for transportation. The Company had anticipated a net loss of negative USD 11 million for FY20 and adjusted EBITDA of around USD 45 million for FY20. The Company had announced its new contracts of more than 58 million gallons of RNG in December 2020. On the technical front, the Company is trading higher than its 20-day simple moving average of USD 7.97, which indicates an upside potential in the stock price. The stock made a 52-week high and low of USD 11.66 and USD 1.05, respectively.

Based on its strong financial position and decent growth prospects, we have given the "Hold" stance on Clean Energy Fuels Corp at the closing market price of USD 10.41 (as on 13 January 2021). 

*All forecasted figures and Peer information have been taken from Refinitiv, Thomson Reuters.

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