- Investors fret forced and questionable business pivot amid deteriorating financial position.
- Bulls look to the cloud and a ray of light in the Skillz (SKLZ) price chart.
- A SKLZ stock buy may be in order for risk tolerant investors.
With higher multiple growth plays once more taking it on the chin, it may not be surprising to learn eSports and mobile games upstart Skillz (NYSE:SKLZ) and its SKLZ stock are getting sacked too.
A risk-off trade has put investors on the defensive on the back of yield inversions, a Deutsche Bank (NYSE:DB) recession warning, unwanted escalations from Covid-19 and Russia, as well as hawkish Federal Open Market Committee (FOMC) minutes and threatening dialogue by Federal Reserve members.
The net result has helped the tech-heavy Nasdaq to a loss of more than 2.50% on the week inside Friday’s session. And top stocks like Microsoft (NASDAQ:MSFT) and Tesla (NASDAQ:TSLA) are taking the bearish shift even harder.
At the same time, former large-cap, tech play Skillz has seen its fortunes have crashed the past year due to company missteps and a more challenging macroenvironment for stocks of its caliber. This has resulted in SKLZ stock giving up a yardage of around 9%.
But is it time for SKLZ stock’s fans to throw in the towel or consider digging in for an offensive play? Let’s look at some of the key pros and cons surrounding Skillz before deciding to play for the bulls, ‘da bears, or that army of Reddit apes.
Skillz Shares May Need Field Medics
A 9% sacking is never easy to swallow. Even in the best growth stories it’s tough not to second guess that type of situation as something more dangerous. But SKLZ stock’s days as an attractive upstart, despite some superficially tempting sales gains on paper, are far from secure.
SKLZ stock is down 64% year-to-date and 84% over the past twelve months. And if investors want to get really red in the face, shares are 94% removed from last February’s all-time-high of $46.30 and peak valuation of $15.60 billion. Worse, it hasn’t been without cause.
A failed “buying growth” playbook has found Skillz management pivoting to an abrupt cost-cutting focus amid piling losses and negative operating cash flow.
There’s roughly $450 million in cash that’s still on hand to get SKLZ into 2023. But weaker fiscal year guidance warns that without aggressive marketing spend and existing debt to service, the outfit’s war chest will be looted.
And that would mean replenishing vis-à-vis increasingly costly help from Wall Street’s loan sharks or damaging shareholder dilution. Either way, SKLZ looks more like a losing proposition than a win-win scenario.
Look to the Cloud or SKLZ’s Price Chart for a Silver Lining
Source: Charts by TradingView
As alluded too, Skillz isn’t being carried off Wall Street’s playing field just yet. It has some cash and there’s still a bit of time left on the clock to make that Hail Mary play or enough to fend off ‘da bears.
Today, the SKLZ bulls’ best chance for changing the dynamics in a positive and meaningful way rests on a couple factors now in play.
First, there’s the gamer’s Skillz Cloud. It’s a newer development which allows users to test games without having to download the entire game. This hosting, “try it out and see if you like it” feature could be of significant help going forward.
Also, and regarding the company’s reduced outlook, with acquisitions, potential battle royale multiplayer games, a partnership with the NFL to begin later this year and new geographies not factored into the revenue guidance, there are drivers which could help turn business around for SKLZ stock.
Lastly, and regarding that business of SKLZ stock itself, with the name still popular among meme traders. As shares pull back from a recent downtrend breakout, faster money bulls have an opportunity to go long with one barrier to entry dismantled.
Suiting Up in SKLZ Stock
If investors are attracted to riskier investment propositions in the stock market, no doubt shares of Skillz qualify. There’s something for bulls, bears and, of course, faster money meme-trading apes.
Of the three and given the circumstances, the observation, maybe oddly enough, is the Reddit crowd has the least trade risk for profiting, while limiting exposure. Bearish short interest of about 19% adds to this mildly optimistic outlook.
A technical-driven purchase through this week’s high of $3.38 to confirm a completed pullback, could result in shares rallying towards $4.50 to $5.00.
Just remember to not look a gift horse in the mouth. And if needed, wisely accept downside risk of 50 cents as an appropriate cost of doing business, off and on the SKLZ stock price chart.
On the date of publication, Chris Tyler does not hold (either directly or indirectly) any securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.