Last year was deplorable for Skillz (NYSE:SKLZ). Shares of the mobile gaming competition platform shot up to $46 in February but have declined by more than 90% since then. Nevertheless, it was a superb year for the underlying business, with substantial year-over-year (YOY) revenue growth. Moreover, SKLZ stock has multiple growth catalysts this year, which could effectively guide it out of its present rut.
The Skillz platform creates a competitive and exciting gaming experience. It facilitates the creation of tournaments on its platform and acts as a bridge between gamers and developers. Moreover, its compelling business model focuses on monetization through competition. The platform can attract significantly more paying users via this model than developers using traditional monetization options.
That said, marketing and platform expansion costs continue to rise aggressively. Still, it appears that Skillz is taking steps to curb costs and carve out a path to profitability.
SKLZ Stock: Plenty to Watch for This Year
This year promises to be a blockbuster one for Skillz and SKLZ stock. It has a few catalysts in motion which could be game-changers.
For example, back in February 2021, SKLZ stock enjoyed an incredible run-up after announcing its NFL partnership. Now, the NFL will be launching NFL-themed mobile games on the Skillz platform. A developer challenge will be held to choose the best or multiple best of these games for the platform. With the NFL being one of the most popular sports leagues globally, Skillz should see a sizeable uptick in users.
Furthermore, Skillz launched in India a couple of weeks ago. This marks the first major expansion effort into new territory for the company. CEO Andrew Paradise has talked about the opportunity since Skillz became a listed entity. As of November of last year, roughly 300 million mobile gamers were in the country, valued at a whopping $1.8 billion. The Indian mobile gaming market is expected to grow by double-digits to over $6 billion by 2025. Moreover, though the purchasing power in India is substantially lower than in the States, a massive increase in active users could help the company’s cost per install significantly.
Bringing Costs Down
Acquisition costs are still a huge problem for Skillz as it looks to turn a profit in the not-so-distant future. However, it appears that management is operating a two-fold strategy that could significantly bring down costs.
Firstly, the company acquired artificial intelligence (AI) ad-tech platform Aarki this past June. The platform will enable Skillz to effectively predict user spending and conversion rates moving forward. This will allow the company to leverage information from the platform to increase user engagement.
Furthermore, Skillz is looking to invest in new content and collaborate with other gaming companies to improve organic traffic on its platform. Last year, it invested $50 million in Exit Games to expand into various multiplayer genres. To that end, it recently announced the launch of a game called Big Buck Hunter: Marksman, which helped significantly improve active users.
The Bottom Line on SKLZ Stock
All told, SKLZ stock had a forgettable run last year at the market. Despite the impressive topline growth, investors are trepidatious about the platforms’ rising acquisition costs.
However, Skillz is looking to bring down these costs through an effective two-fold strategy. That, plus solid growth drivers this year, should help the stock and its underlying business zoom past expectations.
On the date of publication, Muslim Farooque did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.
