Skillz Stock Falters Despite Bullish Revenue Guidance

Posted on: March 25, 2021, 10:21h. 

Last updated on: March 25, 2021, 11:09h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Skillz (NYSE:SKLZ) is continuing its tale of woe. The stock was trading lower Thursday even after the company issued a first-quarter revenue forecast that beats Wall Street estimates.

Skillz stock
Skillz flag flies at the New York Stock exchange in December 2020. The stock is slumping despite upbeat sales guidance. (Image: Twitter)

Shares of the mobile games developer are off 2.32 percent in midday trading. That extends a dismal run in which Skillz stock shed almost 32 percent over just the past week and 35.43 percent over the past month. The name is flat year-to-date and resides 58 percent below its record high notched last month.

Today’s price action suggests investors aren’t overly enthusiastic about the company’s forecasts for the current quarter. Skillz said it expects revenue of $80 million for the January through March period, ahead of the consensus estimate of $76.44 million.

While that revenue guidance is solid, other metrics may weigh on market participants’ view of the esports tournament provider. Skillz projects to be negative on the basis of earnings before interest, taxes, depreciation, and amortization (EBITDA) to the tune of $37 million this quarter. That’s well ahead of analysts’ range of -$21.8 million to -$24.5 million.

The San Francisco-based company delivers first-quarter results after the close of US markets on May 4.

Mixed Reaction

Recently, Skillz has come under fire from short sellers who say the company’s outlook isn’t as compelling as investors are led to believe, and that growth assumptions are overly rosy, among other claims.

Some of the bearish thesis on Skillz centers around the monthly active user (MAU) and paying monthly active user (PMAU) data. For the current quarter, the company projects 2.6 million MAUs — 450,000 of which are paying customers. Analysts expected 2.4 million to 3.2 million MAU and 442,000 to 469,000 PMAU.

“PMAUs means the number of end-users who entered into a paid contest hosted on Skillz’s platform at least once in a month, averaged over each month in the period,” according to the company.

While Skillz stock is scuffling today, the company offers up a positive view of its progress.

“Skillz’s first-quarter outlook exhibits strong momentum attributed to double-digit growth in payors, resulting from both an increase in new installs and rising conversion of existing players into payers,” it said in a statement.

Rough Road for Skillz Stock

As noted above, Skillz has become a target for bearish researchers and traders, drawing two lengthy reports from short-sellers just this month. The company refuted both reports, saying each is littered with erroneous claims.

As for price action in the stock, it wasn’t helped when Skillz revealed an equity sale of up to 36.8 million shares last week. That further emboldened the authors of one of the bear notes on the company, who pointed to CEO Andrew Paradise selling nearly $200 million worth of stock in the offering.

Skillz’s struggles also bolster the anti-special purpose acquisition company (SPAC) crowd, which asserts companies born out of blank-check mergers underperform those opting for traditional initial public offerings (IPOs).

There’s something to those claims, as Skillz is one of several gaming operators that recently went public following SPAC transactions that have seen share prices slammed this year.