Skillz (SKLZ) AI Stock Analysis

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Skillz

(NYSE:SKLZ)

52Neutral

Skillz's financial performance is a significant concern with declining revenues and persistent losses, which deeply affect its overall score. While legal actions and improvements in financial metrics offer some optimism, the company's challenges in user conversion and revenue growth weigh negatively. Technical indicators suggest potential for short-term gains, but valuation remains unattractive due to negative earnings.

Positive Factors

Employee and Hiring

Commentary around an accelerated hiring velocity in Vegas/Bangalore, higher caliber hires, and improved employee sentiment is encouraging.

User Growth

There has been a third consecutive quarter of stability in the paying user base with a 5% growth in overall monthly active users.

Negative Factors

EBITDA Challenges

Until Skillz delivers more material top-line growth, there is reluctance to commit to positive adjusted EBITDA in any of the next ten quarters.

Revenue Decline

Revenue and GMV are both still declining at a greater than 30% year-over-year pace.

Skillz (SKLZ) vs. S&P 500 (SPY)

Market Cap

$74.03M

Dividend YieldN/A

Average Volume (3M)87.33K

Price to Earnings (P/E)―

Beta (1Y)2.19

Revenue Growth-37.90%

EPS Growth80.16%

CountryUS

Employees225

SectorCommunication Services

Sector Strength79

IndustryElectronic Gaming & Multimedia

Share Statistics

EPS (TTM)-2.71

Shares Outstanding14,438,426

10 Day Avg. Volume92,055

30 Day Avg. Volume87,332

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)0.80

Price to Cash Flow (P/CF)-1.90

P/FCF Ratio0.00

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$10.00

Price Target Upside140.96% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering2

Skillz Business Overview & Revenue Model

Company DescriptionSkillz Inc. is a leading mobile gaming platform, primarily operating in the esports sector. The company enables game developers to monetize their content through competitive gaming, providing a platform for players to engage in skill-based contests. Skillz offers a wide array of games, allowing users to compete in real-time tournaments and win cash prizes. The company is recognized for its innovative approach to integrating esports into mobile gaming, thus enhancing player engagement and retention.

How the Company Makes MoneySkillz Inc. generates revenue primarily through entry fees from players participating in skill-based games and tournaments on its platform. A portion of these fees is distributed as prizes, while the remainder is retained by Skillz and shared with the game developers. The company also earns money through partnerships with developers, who utilize Skillz's platform to increase the reach and monetization of their games. Additionally, Skillz may generate revenue from sponsorships and advertising on its platform, although the primary focus remains on facilitating paid competitions and sharing the revenue with content creators.

Skillz Financial Statement Overview

Summary

Skillz faces significant financial challenges, including declining revenues and persistent losses, affecting its profitability. While the company maintains a stable debt position, ongoing losses and negative cash flows pose risks. The high gross profit margin is a positive aspect, but strategic improvements are needed to achieve sustainable growth and profitability.

Income Statement

Neutral

Skillz's income statement shows declining revenue with a TTM (Trailing-Twelve-Months) revenue of $104.2M, down from $152.1M in 2023. The gross profit margin remains high at 86.9%, indicating efficient cost management. However, the company suffers from negative net and EBIT margins due to high operating expenses, resulting in a significant net loss over the years.

Balance Sheet

Neutral

The balance sheet reflects moderate financial health with a debt-to-equity ratio of 0.69, suggesting a balanced leverage position. The equity ratio stands at 51.1%, indicating a substantial portion of assets funded by equity. However, the declining stockholders' equity signals potential risks if losses continue.

Cash Flow

Negative

Cash flow analysis reveals challenges with negative free cash flow in recent periods, although there was a slight improvement in operating cash flow. The operating cash flow to net income ratio is positive in TTM, but free cash flow remains negative, indicating ongoing cash burn issues.

TTM	Dec 2023	Dec 2022	Dec 2021	Dec 2020	Dec 2019
Breakdown
Income Statement		Total Revenue
104.23M	152.08M	269.71M	384.09M	230.12M	119.87M
	Gross Profit
90.61M	136.70M	238.99M	359.38M	217.83M	114.16M
	EBIT
-90.88M	-114.29M	-253.31M	-287.12M	-99.62M	-24.83M
	EBITDA
-88.18M	-96.31M	-402.04M	-194.18M	-142.46M	-20.40M
	Net Income Common Stockholders
-42.60M	-101.36M	-438.88M	-181.38M	-122.46M	-29.82M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
25.63M	302.03M	489.78M	560.39M	262.73M	25.63M
	Total Assets
38.86M	395.83M	621.29M	1.02B	282.42M	38.86M
	Total Debt
9.63M	136.70M	286.86M	294.57M	0.00	9.63M
	Net Debt
-16.00M	-165.32M	-75.66M	53.23M	-262.73M	-16.00M
	Total Liabilities
20.19M	185.34M	342.89M	399.13M	47.40M	20.19M
	Stockholders Equity
18.66M	210.49M	278.40M	623.70M	235.02M	18.66M
Cash Flow		Free Cash Flow
-184.00K	-84.99M	-181.49M	-183.39M	-59.48M	-25.16M
	Operating Cash Flow
2.29M	-71.76M	-179.60M	-180.15M	-56.23M	-21.94M
	Investing Cash Flow
4.38M	168.30M	311.39M	-643.92M	-3.25M	-3.22M
	Financing Cash Flow
-28.30M	-149.95M	-10.61M	802.68M	296.58M	31.17M

Skillz Technical Analysis

Technical Analysis Sentiment

Negative

Last Price4.15

Price Trends

50DMA

5.32

Negative

100DMA

5.39

Negative

200DMA

5.68

Negative

Market Momentum

MACD

-0.36

Negative

RSI

40.62

Neutral

STOCH

53.58

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For SKLZ, the sentiment is Negative. The current price of 4.15 is below the 20-day moving average (MA) of 4.41, below the 50-day MA of 5.32, and below the 200-day MA of 5.68, indicating a bearish trend. The MACD of -0.36 indicates Negative momentum. The RSI at 40.62 is Neutral, neither overbought nor oversold. The STOCH value of 53.58 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for SKLZ.

Skillz Risk Analysis

Skillz disclosed 49 risk factors in its most recent earnings report. Skillz reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Skillz Peers Comparison

Overall Rating

UnderperformOutperform

Sector (58)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
EA	74 Outperform	$37.25B	36.37	14.04%	0.53%	-2.99%	-0.46%
ROKU	63 Neutral	$8.79B	―	-5.37%	―	18.03%	82.15%
TTWO	62 Neutral	$37.43B	―	-51.45%	―	1.00%	-148.89%
Sector *	58 Neutral	$26.25B	2.79	-10.85%	4.33%	2.15%	-44.22%
SKLZ	52 Neutral	$74.03M	―	-25.25%	―	-37.90%	80.16%
CHGG	45 Neutral	$50.47M	―	-147.16%	―	-13.78%	-5297.96%

* Communication Services Sector Average

Performance Comparison

SKLZ

Skillz

4.15

-1.69

-28.94%

Electronic Arts

142.93

16.55

13.10%

TTWO

Take-Two

212.07

66.77

45.95%

CHGG

Chegg

0.48

-6.39

-93.01%

ROKU

Roku

60.22

1.28

2.17%

Skillz Earnings Call Summary

Earnings Call Date: Mar 13, 2025 | % Change Since: -18.79% | Next Earnings Date: Apr 30, 2025

Earnings Call Sentiment Neutral

The earnings call highlighted significant initiatives like the developer accelerator program and improvements in EBITDA loss, alongside challenges such as revenue decline and ongoing litigation. The company shows promise with a strong cash position and strategic growth efforts but faces hurdles in revenue and user engagement.

Highlights

Developer Accelerator Program Launch

Skillz Inc. announced a $75 million developer accelerator program to drive innovation and expand offerings on its platform over the next three years.

Improvement in Adjusted EBITDA Loss

Full-year adjusted EBITDA loss excluding litigation expenses improved compared to 2023, showcasing steady strides towards profitability.

Sequential Growth in Paying MAU

Paying Monthly Active Users (MAU) grew sequentially for three months from November through February, ending February with 123,000 paying MAUs.

Successful Legal Settlements

Skillz Inc. settled a patent infringement case with Avia Games, expecting a $7.5 million payment as part of the settlement.

Strong Cash Position

Ended the year with $282 million in cash and cash equivalents, providing significant financial flexibility.

Lowlights

Revenue Decline

Fourth-quarter revenue was $20 million, down 17% sequentially and 35% year over year.

Decreased User Engagement

Despite a slight increase in the paid user conversion rate to 14.6%, both paying MAU and overall MAU were lower quarter over quarter.

Litigation Challenges

Skillz Inc. is involved in ongoing lawsuits against Papaya and Voodoo, indicating significant legal expenses and challenges.

Company Guidance

During the Skillz Inc. 2024 fourth quarter earnings call, the company provided guidance on several key metrics and strategic initiatives. The call highlighted the company's efforts to return to consistent top-line growth and positive adjusted EBITDA, supported by a strong balance sheet with $282 million in cash and cash equivalents. Despite a revenue decline to $20 million, down 17% sequentially and 35% year-over-year, the company noted improvements in its paid user conversion rate to 14.6% in Q4, up from 14.3% in Q3. Operating expenses, excluding litigation costs, were reduced to $16 million, showing a $3 million improvement from the previous quarter. The company also focused on scaling its Las Vegas and Bangalore-based teams and maintaining low user acquisition (UA) spend at $5 million, the lowest since 2018. Furthermore, Skillz announced a $75 million developer accelerator program to support the creation of new games, with a goal to support at least 25 high-potential games. The company ended Q4 with $129.7 million in outstanding debt and expects to receive a $7.5 million payment from Avia Games, as part of a patent infringement case settlement.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.