Skillz Inc.

SKLZ Details 

Skillz Inc. (NYSE: SKLZ) is engaged in providing an online mobile gaming platform that can be integrated into iOS and Android games.

Flying Eagle Acquisition Corp completed the business combination with Skillz Inc. and began trading as a combined entity on the New York Stock Exchange under the ticker symbol "SKLZ" from 17 December 2020. Therefore, the earlier given recommendation on the delisted entity-Flying Eagle Acquisition Corp was closed at the closing price on the last trading day i.e., 16 December 2020 at $17.68, as per data from the secondary sources.

Key Findings from 1QFY21 Results

• Increase in Top-Line: During the quarter, the company’s total revenue increased a whopping 92% year over year and came in at $83.7 million, depicting 21 consecutive quarters of revenue growth. In 1QFY21, the company expanded its Android footprint, mounting revenue from Android users two times quicker than iOS.
• Rise in Gross Profit: During the quarter, gross profit also increased 95% year-over-year and came in at $79.4 million.
• Increase in Net loss: In 1QFY21, the company reported a net loss of $53.6 million, which increased from a net loss of $15.5 million reported in the year-ago period.
• Growth in GMV: Gross Marketplace Volume1 (GMV) increased 85% from pcp and came in at $566.6 million.

Revenues Highlights; Analysis by Kalkine Group

Key Updates:

• SKLZ to Acquire Aarki: On June 2, 2021, the company inked a deal to buy a leading technology-focused marketing platform, Aarki. Integrating SKLZ’s competitive platform with Aarki’s advanced advertising capabilities positions the company well to broaden its footprint across the fast-growing mobile gaming industry.
• Managerial Changes: On 4 May 2021, the company appointed Ian Lee as SKLZ’s Chief Financial Officer (CFO).

Key Risks

• The company is exposed to cybersecurity risks pertaining of data breaching and compliance risks.
• The company’s bottom line may get hurt owing to the risk of lockdowns and restrictions for an uncertain duration of time.
• Rising marketing costs is likely to impact margins, going forward. In 1QFY21, total costs and expenses rose ~129.87% year over year.

Outlook: For FY21, the company is raising its revenues outlook to $375 million, depicting an increase of 63% from the prior corresponding period.

Stock Recommendation: Over the last three months, the stock went up by ~1.95%. The stock made a 52-week low and high of $10.26 and $46.30, respectively. On a technical analysis front, the stock of SKLZ has a support level of ~$15.4 and a resistance level of ~$17.2. On a TTM basis, the stock of SKLZ is trading at a P/BV multiple of 9.2x, lower than the average of 15.7x.

Considering the increase in top-line in 1QFY21, acquisition synergies, robust product adoption, encouraging FY21 outlook, current trading levels, valuation on a TTM basis, we give a “Hold” recommendation on the stock at the closing price of $16.69, down by ~5.76% on 13 July 2021.  

SKLZ Daily Technical Chart, Data Source: REFINITIV 

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

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