It could be said that history was made when, after its merger with special purpose acquisition company (SPAC) Flying Eagle Acquisition, Skillz (NYSE:SKLZ) became the first publicly traded mobile e-sports platform. Today, you won’t find Flying Eagle shares on any public exchange, but you can trade SKLZ stock.
Throughout the past year, the onset of the Covid-19 pandemic has accelerated the growth of the e-sports market.
Skillz serves this market as the company “offers software that helps take a regular mobile game and turn it into an esports phenomenon,” according to InvestorPlace contributor Sarah Smith. Additionally, Skillz “helps host tournaments and also produces gameplay clips and highlights.”
If the e-sports industry is still in its infancy, perhaps it’s a window of opportunity for early investors. And, as we’ll soon discover, Skillz is a serious moneymaker in this niche.
A Closer Look at SKLZ Stock
Back in May of 2020, SKLZ stock (previously known as FEAC stock) was trading near the $10 level. That’s not unusual for early stage SPAC stocks.
Yet, over time, bulls started to gain momentum. By the end of 2020, they managed to push the stock price to $20.
Doubling the share price is certainly impressive, but that’s not the end of the story. The bulls kept on charging ahead, propelling the stock up to a 52-week high of $46.30 on Feb. 5, 2021.
Apparently that move was too fast, and the bulls lost their mojo in late February and early March. By March 19, SKLZ stock was trading around the $24.44 level.
That’s still a considerable gain in less than a year. So, is it too late and too expensive to buy at the current price? Not at all, assuming you believe that the e-sports niche, and Skillz in particular, is poised for growth.
Standing at the Intersection
Near the end of last year, Skillz declared that it had $250 million in cash, as well as no debt on the company’s balance sheet.
I don’t know about you, but as a market watcher, I like to focus on companies with plenty of capital and zero debt. Moreover, I prefer to concentrate on companies in hyper-growth markets.
Skillz would definitely fit into that category. According to the company, the mobile gaming market is projected to more than double to $150 billion by the year 2025.
CEO Andrew Paradise founded Skillz on the premise that “esports are for everyone,” and that’s a credible claim in a time when attending live sports events could be problematic.
“We stand at the intersection of mobile gaming and esports, perhaps the two most exciting growth opportunities of the next decade,” declares the Skills CEO. That’s big talk, I’ll grant, but does the company have the numbers to back it up?
The Highlight Reel
Skillz’s recently reported financial data for its fourth quarter and full-year 2020 will answer that question handily. Let’s begin with the fourth quarter:
- Revenue grew to $68 million, up 95% year-over-year
- Gross profit increased by 95% year-over-year
- Gross margin was 95% for the quarter
- Furthermore, Skillz’ Gross Marketplace Volume (GMV) grew 78% year-over-year
Now, we’ll glance at full-year 2020:
- Revenue increased by 92% compared to 2019
- Gross profit improved by 91% on a year-over-year basis
- Gross margin was 95% for the year
- GMV showed an increase of 80% year-over-year
“Our first quarter as a publicly traded company was our twentieth consecutive quarter of revenue growth,” Paradise proudly commented.
“We look forward to many more such quarters ahead,” the Skillz founder added. With numbers like those shown above, I can’t blame Paradise for his optimism.
SKLZ Stock: The Bottom Line
And so, the Flying Eagle has landed, and Skillz is flexing its skill in generating strong revenues.
SKLZ/FEAC stock might not be available at $10 anymore, but as long as the e-sports industry and Skillz’s market profile keep on growing, the stock should still be worth buying.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.