It’s been a battle royale dominated by a rather large group of short-sellers in 2021. But can apes and bulls pull together going forward and dismantle the bearish cycle in Skillz (NYSE:SKLZ) stock?
Let’s examine SKLZ stock off and on the price chart, then offer a risk-adjusted determination aligned with those findings.
What goes up, must come down. It’s not always the case, but in the stock market and specific to the bulk of last year’s over-heated SPAC market, it’s certainly proven the case.
Is SKLZ Stock a SPAC Casualty?
And that woeful underperformance includes de-SPAC’d mobile esports platform SKLZ stock.
Company-specific excuses of course are everywhere. But key and not to be overlooked, a broader and less sympathetic backlash by Wall Street against sky-high and no-multiple growth stocks widespread to an invasively bullish SPAC market in 2020, has been critical to SKLZ bearish price compression.
Today though, down about 45% year-to-date and more than 75% beneath Skillz peak $15.60 billion valuation and share price of $46.30 from early February, supports for the stock’s bearish cycle to finish are growing.
Off the price chart, SKLZ enjoyed a huge boon in paid subscriptions from mobile gamers wanting to play in Skillz esports and tournaments. Over the past year and through the end of Skillz first-quarter the outfit managed to grow its monthly paying players (MPP) by 209,000 and nearly double its base of 467,000.
The Second Quarter
This past month’s Q2 release did result in Skillz’s first contraction of MPP growth after eight consecutive quarters of gains. Still, a modest miss amounted to a loss of just 4,000 MPP’s following torrid Covid-assisted user growth.
Reasonably too, with most MPP’s unlikely to put down their mobile devices in favor of battle royale water gun battles in the park post-Covid, appreciatively SKLZ stock’s sales multiple has shrunk from a fairly hefty 40-plus ratio to one which finds shares fetching a more manageable forward price of about 11x.
To be fair, the price of marketing and expenses associated with SKLZ’s accumulation and retention of MPP’s has come with a steep cost. In 2021’s first six months the company took in $173 million in revenue but spent $196 million in sales and marketing.
It’s less-than-terrific. And investors didn’t overlook the obvious, either. Immediately after SKLZ late July quarterly release, shares plummeted by nearly 11% to fresh year-to-date lows. But conditions could be looking up going forward.
Skillz early June acquisition of data marketing shop Aarki which uses machine-learning algorithms to facilitate stronger outcomes, MPP-related expenses should begin to see a meaningful reduction in those costs over the coming quarters.
Aarki also promises to be a significant growth accelerator as it facilitates more varied player options such as popular battle royale capabilities which pit teams of players against each other.
SKLZ Stock Weekly Price Chart
Source: Charts by TradingView
Amid the bullish and bearish evidence presented above, but also factoring in Skillz’s inflated short interest of 23% and a lifetime double-bottom pattern nearing its finishing touches, SKLZ stock may be ready to challenge a battle royale that’s largely favored bears for nearly six months.
Technically and as the illustrated weekly chart reveals, shares of SKLZ are now in a second week of inside price consolidation after forming a possible pattern pivot low. A bullish reaction in Skillz through last week’s high of $11.34 sets the stage for a meaningful bottom and hopefully, longer-term rally.
Right now and with stochastics having already crossed bullishly over, the situation in SKLZ stock simply deserves monitoring for a buy signal.
Bottom line though and to play the game more effectively and regardless of what your battle royale ape teammates may or may not be doing, an intermediate-term December or January $12.50/$20 collar looks like an interesting way to bet more smartly on SKLZ stock.
On the date of publication, Chris Tyler does not hold (either directly or indirectly) positions in any securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.