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Is SKLZ Stock Still Worth a Bet? By TipRanks


© Reuters. Is SKLZ stock still worthwhile to bet on?

The volatility experienced by individuals who invested in digital gaming stocks Skillz (SKLZ), has been quite high throughout the year. This company’s shares started the year below $20. Wolfpack Research earlier in the year accused this stock of being a little more than a “pump-and-dump” scheme. It had fallen by 44% from its highs.  

There are many catalysts available that could help the stock rise quickly. The stock has seen multiple surges. Although the stock’s volatility is quite evident, some have suggested that it could become a multi-millionaire stock. These factors are why I am neutral about Skillz stock at the moment.

(See Skillz stock charts on TipRanks)

Is a Short Squeeze on the Way for SKLZ Stock?

Short sellers have been a lucrative target for retail investors in recent years. This retail investor speculator has taken up the target of stocks with high rates of short interest or high loan fees. Any upward surge can force short sellers from their positions and cause them to sell to make up the difference. The result can be a dramatic short-term rise in the stock’s value.

Investors are watching closely and may be interested in SKLZ stock because of these metrics. This company is still shorted and it’s too expensive to retain. Because of this, SKLZ stock has experienced a previous squeeze that was more than $46 per Share earlier this year.

SKLZ stock can be purchased at the $11 level by investors. This could indicate that another squeeze to these levels may bring a 4-bagger, in an environment of extreme bullishness for squeeze play.

What happens if another squeeze occurs? Many investors want to know the answer. Momentum appears to be weak, but there is a solid group of retail investors still holding on to this idea.

Mixed Results and Acquisitions of Skillz

One of the reasons Skillz has seen momentum wane of late has been the company’s mixed financial results, reported of late.

Although the company saw a solid growth rate of 52% over the past quarter, its net loss nearly quadrupled. Skillz had a net loss in this quarter at $79.8M, which is a significant increase from $20.2 million the year before.

This is a significant loss considering that the gross margins of Skillz are still high. Skillz claims a 95% profit margin on revenues. This is quite impressive. Skillz’s near-term results have been muted by the costs of growing its business.

Skillz is a high-growth company, so many investors might not be expecting (or want) it to make a profit right away. Growth is key. The company has been performing well in this area.

There are concerns, however that the company may suffer losses similar to these and require further capital raises. This is especially true considering Skillz’s plans to grow through acquisitions and partnerships.

Skillz has announced its acquisition of Aarki. It brings in an additional 465 millions users. Skillz will be able to attract new users more efficiently with this deal. Skillz expects this acquisition to increase revenues by $13million. Skillz has now increased their 2021 revenue projection to $389 million.

Skillz has also been involved in crucial partnerships with Exit Games, and with the NFL in the second quarter. Skillz is expecting these partnerships to increase awareness and excitement.

What Do Analysts Think About SKLZ Stock

Skillz stock is considered a Moderate Buy according to TipRanks analysts ratings consensus. Three Buy recommendations are available and two hold recommendations. 

The average Skillz price target is $19.00. The price targets of analysts range from $15 to $25 per share. 

Bottom Line

Going after short squeeze opportunities in this market has proven to be a difficult task. Timing these short-term bets is often the hardest part. This strategy is best used by professionals who have money to gamble.

These momentum plays may not be a good idea for long-term investors. There is significant risk associated with the upside movements these stocks experience. SKLZ stock may be one that investors should be careful with.

Disclosure: Chris MacDonald didn’t hold any positions in the securities discussed in this article at the time it was published.

Disclaimer: This article is solely the author’s opinion and does not reflect the opinions of TipRanks and its affiliates. It should only be used for informational purposes. TipRanks does not warrant the accuracy, reliability or completeness of this information. The article does not constitute a solicitation or recommendation to buy or sell securities. The article does not provide legal, financial, investment, or professional advice. It also doesn’t take into consideration the individual needs or requirements. Neither is the information contained in it a complete or comprehensive statement about the subject or issues discussed. TipRanks or its affiliates are not responsible for the contents of this article. Any action you take based on the information is your responsibility. TipRanks’ or any affiliates does not endorse this article or make it a recommendation. Performance in the past is no guarantee of future performance, price or results.