Why Skillz Is Making Over 12% This Week

What happened

Actions of Skillz (NYSE: SKLZ) are down 12.2% from last Friday’s close, according to data from S&P Global Market Intelligence, on no specific news for the mobile esport platform, but rather a build-up of negative sentiment surrounding its future immediate.

Just a week earlier, for example, Skillz chief technology officer Miriam Aguirre announced she was stepping down from the company after eight years in the role.

Once a favorite of meme stocks, Skillz remains a sharply short stock with over 22% of its outstanding stocks sold short.

SKLZ data by YCharts

So what

The gaming platform‘s third quarter earnings report last month was actually quite positive, although the market reacted with its usual opposite response when it comes to Skillz.

The main concern appears to center on whether the acquisition of Aarki, the global demand-side advertising platform that reaches some 465 million people, can be harnessed sufficiently to help reduce costs of customer acquisition.

Skillz maintains that Aarki expands the universe of players that Skillz can reach, companies can reduce these acquisition costs over time. Management claims that the long-term value Skillz derives from its members is four times those costs, and “sniffing[ing] data on 5,000 billion auctions every month, ”CEO Andrew Paradise believes the company can build the data value chain for greater long-term value for the user.

“Before Aarki, we were capturing approximately 1.8 billion data points per day on gameplay and user behavior,” Paradise said. CitiWorld Conference on Technology. “Now we are capturing the 5,000 billion monthly auctions that we participate in.”

Friends playing games on smartphones.

Image source: Skillz.

Now what

Skillz must prove that he can significantly change his business to generate more income and profit. He brings players to his mobile platform, he now has to monetize them.

Monthly Active Users (MAUs) grew 11% year-on-year to 3 million in the third quarter, a sequential gain of 25%, as Skillz introduced new gameplay, while paid MAUs grew 47% per year. compared to last year to hit a new high of 510,000. It is important to note that revenue per paying user reached $ 66.82, an increase of 15%.

Reducing Skillz costs is critical now, but distractions such as executive turnover are likely to keep entertainment stocks volatile.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.


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