Why Skillz Stock Died This Week and Revived Today

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What happened

Shares of mobile games platform Skillz (NYSE:SKLZ), the successful 2020 SPAC IPO that’s lost most of its gains over the last couple of months, are taking investors for another wild ride this week.

Yesterday, Skillz stock dropped 11.1% below its Friday close on no apparent bad news. Today, the stock is making back all of those losses and more, gaining 13.3% through 10:15 a.m. EDT — also on no news of note.

Image source: Getty Images.

So what

Skillz hasn’t ever earned a profit, and its losses and cash burn surged last year (partly as a consequence of expenses incurred during the IPO). The company’s next earnings report probably won’t be due out till June, but even that won’t be too impressive. Analysts polled by S&P Global Market Intelligence are forecasting a $0.13 net loss per share, followed by further losses throughout the year. In fact, Skillz isn’t expected to turn GAAP profitable before 2024.  

Now what

The good news is that positive free cash flow could emerge earlier than that, in 2023. And even the GAAP losses should slowly shrink year by year after peaking at $0.47 per share. Whether investors choose to focus on the diminishing losses as time goes by, or the fact that there are still losses, will probably determine how Skillz stock fares in the years ahead.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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