When it comes to Skillz (NYSE:SKLZ) and investors in SKLZ stock, unlike some well-liked characters outside today’s stock market theater, it may be a game-over situation. Let me explain.
Esports and stocks can be both fun and serious business. But mobile gaming platform SKLZ which combines the two has been anything but a crowd pleaser for investors betting on the name.
Since its heyday peak of $46.30 per share in February 2021, SKLZ stock has plunged a staggering 95%.
So what went wrong in SKLZ?
SKLZ Stock Shares the Pain
There is ,of course, Wall Street’s ongoing higher-multiple, risk-off trade now in its extended second showing since February 2021.
An assortment of SPACs brought to market just like SKLZ over the past couple years is evidence of that.
If misery loves company, SKLZ investors have plenty. But a 95% bear market in SKLZ stock is still extreme, even by that group’s ignominious standards.
And as important as bearish market sentiment, if not more so, there’s been company-specific missteps in SKLZ.
What’s more, unlike Tom Cruise’s bit as a sports agent receiving redemption in Jerry Maguire or Cuba Gooding Jr. famously receiving his Benjamins in the crowd pleasing movie, those missteps are proving costly to Skillz.
So much so, there’s a chance the sacking SKLZ stock has gone through may not be one it’ll recover from, according to a Motley Fool contributor that threw in the towel recently following earnings.
As Skillz shifts from unsustainably buying growth, to an abrupt cost-cutting strategy that warns of its own ugly cost at growth’s expense based on much weaker fiscal year guidance, it suggests Skillz can’t successfully grow and make money at the same time.
Toss in a vague $300 million debt raise this past December and management hitting the pause button on key investment in India’s growth market, SKLZ stock is failing to show investors the money going forward.
SKLZ Stock Monthly Price Chart
Source: Charts by TradingView
At a market cap of $1 billion that’s far-removed from last February’s $15.6 billion peak payday, the case for a contrarian and more speculative investment in SKLZ might draw interest from some investors.
But cheaper doesn’t necessarily add up to more value. And that appears to be the case for Skillz.
Less-than-compelling business prospects, 19% short interest and shares not showing any indications of bottoming on the monthly chart, yet alone the weekly time frame all add up to a pass on SKLZ stock as a potential buy.
But what if Skillz is already in your portfolio? Rightfully, it may be time to take a cue from the investor at Motley Fool.
Still, I get it. And for those that can’t refuse the temptation of getting even or ahead offensively, I’d suggest going long a LEAPs bull call spread.
This type of vertical reduces Greeks risk like Vega or volatility risk and Theta, or time decay.
In today’s on-the-rise interest-rate environment, there’s even a small interest rate benefit compliments of Rho.
To be fair, this kind of play won’t have bullish investors making ESPN’s highlight film anytime soon. But it will keep bulls in the game with considerable upside leverage should Skillz pull off a Hail Mary.
Today, one such vertical which looks interesting both off and on the price chart is the LEAPs 2024 January $5/$7.5 call spread.
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.