Don’t Fear an Economic Slowdown. Skillz Stock Will Thrive Regardless.

Over the past month, we’ve seen Skillz (NYSE:SKLZ) stock drop about 20% against the backdrop of a broader selloff in small-cap growth stocks. Worries about an economic slowdown are to blame, but we believe this massive slowdown will never materialize. If anything, SKLZ stock will benefit from various factors contributing to the acceleration of the shift to digital.

Gamer Playing and Winning in First-Person Shooter Online Video Game on His Personal Computer

Source: Gorodenkoff / Shutterstock.com

These fears are rooted in the rapidly spreading Delta variant of the Covid-19 virus. People are unsure whether the government will be forced to reinstitute social distancing and other safety measures.

However, we don’t see this happening.

Instead, we think Covid-19 will be characterized by multiple, temporary “hot spot outbreaks” over the next several years. So, even if different economies across the globe are affected, the same widespread closure the globe experienced in the past likely won’t be a thing again.

The global economy won’t be shut down again. Specific governments, when effected by a variant of Covid-19, will temporarily bring back loose safety measures for a few weeks or so. This will be enough to greatly reduce spread of the virus, and then things will gradually be able to return to normal.

We’ve already seen countries take this approach to flare ups in the virus, including France, Australia and Vietnam. And these “mini lockdowns” will continue to take place over the next year, especially as vaccination rates remain low.

The Bottom Line on SKLZ Stock

When strung together, these mini lockdowns will cause global consumer behavior to increasingly shift towards digital. And this is a huge win for Skillz. Consumers will be more inclined to play eSports games on their phones rather than opting for gaming in-person at casinos.

Unsurprisingly, our channel checks show that download volume of Skillz-based mobile games has improved in recent months.

Downloads of Solitaire Cube bottomed out in April but have risen sharply in May and June. Big Buck Hunter’s popularity in July has led it to rank in the Apple (NASDAQ:AAPL) app store’s top 100 apps. And 21 Blitz has also seen a surge in its app download rank over the last month or so.

Seeing this data, we think Skillz is set to report strong second quarter earnings. And we think their management team will have the confidence to deliver a strong guide. On the back of that strong beat-and-raise report, look for SKLZ stock to power toward $30.

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On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.

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