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Today we are looking at Skillz Inc. (NYSE: SKLZ), to determine if you should buy SKLZ stock. We will look at SKLZ financial ratios, analyst ratings, and current valuation to determine a SKLZ Stock forecast and price.
What Does SKLZ Do?
Skillz Inc. operates a mobile games platform that connects players in fair, fun, and meaningful competition. The company primarily develops and supports a proprietary online-hosted technology platform that enables independent game developers to host tournaments and provide competitive gaming activity to end-users worldwide. It also hosts casual esports tournaments to a range of mobile players. SKLZ Stock Analysis and Forecast
Skillz Inc. Competition and Comparables
In order to undergo a comparable analysis (to determine SKLZ stocks value), we need to first outline who SKLZ’s competitors are.
These competitors need to be publicly listed, have valid financial metrics/multiples, operate in a similar manner to SKLZ, and have a market cap similar to SKLZ (if possible).
By keeping this in mind, I found the following list of companies to be some of SKLZ stocks closest competitors:
KT, GRUB, FVRR, PHI, TIMB, TV, MBT, NYT, ZH, MSGS
SKLZ Stock Earnings and Financial Information
Analysis of SKLZ Earnings and Financial Ratios
SKLZ Earnings (Yearly):
- SKLZ Revenues: In FY 2021, SKLZ experienced a yearly increase in revenues of $153.97M (or 66.91%) resulting in a total revenue figure of $384.09M.
- SKLZ Cost of Revenues: In FY 2021, SKLZ experienced a yearly increase in their cost of revenues of $12.43M (101.21%), resulting in a total revenue figure of $24.71M. Since the increase (of 101.21%), in SKLZ’s cost of revenue was greater (by 34.3%) than the increase (of 66.91%) in SKLZ’s revenues, we should expect that SKLZ experienced an decrease in their FY gross profits.
- SKLZ Gross Profit: In FY 2021, SKLZ experienced a yearly increase in their gross profit of $141.54M (or 64.98%) resulting in a total gross profit of $359.38M. This decrease is inconsistent with our conclusion from the comparison of revenues and cost of revenues between FY and FY.
- SKLZ EBITDA: In FY 2021, SKLZ experienced a yearly decrease in their EBITDA of $68,606,000 (or -57.45%) resulting in a total EBITDA of $-188.02M.
- SKLZ Net Income: In FY 2021, SKLZ experienced a yearly decrease in their net income of $58,916,000 (or -48.11%) resulting in a total net income of $-181.38M.
- SKLZ EPS: As a result of SKLZ’s decrease in net income of $58,916,000, SKLZ’s EPS also decreased (by $-0.04 from $-0.42 in FY 2020 to $-0.46 in FY 2021
Overall, in 2021 the SKLZ earnings report was not very good at all as all of their metrics (aside from gross profit) shrunk by a sizable amount. However, has this turned around in a more recent timeframe? Let’s check SKLZ earnings report from Q1 2022 to find out.
SKLZ Earnings (Quarterly):
- SKLZ Revenues: In Q1 2022, SKLZ experienced a quarterly decrease in revenues of $-15.41M (or -14.16%) resulting in a total revenue figure of $93.44M.
- SKLZ Cost of Revenues: In Q1 2022, SKLZ experienced a quarterly increase in their cost of revenues of $843k (10.01%), resulting in a total revenue figure of $9.27M. Since the increase (of 10.01%), in SKLZ’s cost of revenue was greater (by 24.17%) than the decrease (of -14.16%) in SKLZ’s revenues, we should expect that SKLZ experienced an decrease (roughly -24.17%) in their Q1 gross profits.
- SKLZ Gross Profit: In Q1 2022, SKLZ experienced a quarterly decrease in their gross profit of $-16.25M (or -16.18%) resulting in a total gross profit of $84.17M. This decrease is consistent with our conclusion from the comparison of revenues and cost of revenues between Q1 2022 and Q4 2021.
- SKLZ EBITDA: In Q1 2022, SKLZ experienced a quarterly decrease in their EBITDA of $41,615,000 (or -44.74%) resulting in a total EBITDA of $-134.63M.
- SKLZ Net Income: In Q1 2022, SKLZ experienced a quarterly decrease in their net income of $49,142,000 (or 49.65%) resulting in a total net income of $-148.11M.
- SKLZ EPS: As a result of SKLZ’s decrease in net income of $49,142,000 SKLZ’s EPS also decreased (by $0.12) from $-0.25 in Q4 2021 to $-0.37 in Q1 2022.
Overall, it seems as though SKLZ had a poor financial performance (due to EPS $-0.12) as many of their financial metrics shrunk, most notably their EPS (by $-0.12), as well as their net income (by $49,142,000), and other metrics (as you can tell from the above bullet points).
However, SKLZ stock missed their EPS estimate by $0.19 (or -105.56%), as they reported an EPS of $-0.37 for the quarter (compared to their estimated EPS of $-0.18).
Is SKLZ Share Dilution an Issue?
As part of their Q1 2022 earnings release, SKLZ stated that they currently have 401.65M Shares Outstanding (weighted average), which is up 1.67M shares (from 399.98M shares outstanding in Q4 2021). This is negligable as it represents less than a 1% dilution, which is good to see as an investor.
Latest SKLZ Stock Analyst Ratings
Here is the current analyst rating distribution for SKLZ. In total there are 8 SKLZ stock analyst ratings.
Analyst Ratings have provided relatively strong indicators of future price movement, which is why they are used to determine if SKLZ stock is a buy or sell
SKLZ Stock Rating and Forecast
Currently, we have 3 financial ratings that help investors get a general idea of a company’s valuation. These 3 metrics include DCF, ROE, and P/E, which are very common in the investing/valuation climate.
Firstly, SKLZ stock has a DCF rating of 5 — Very Strong. DCF ratings determine the value behind a company based on their financial projections, expectations, and discount rate (time value of money). This is one of the most used valuation models in the stock market, and thus a high level of importance should be associated with this rating.
Secondly, SKLZ stock has an ROE rating of 2 — Weak. SKLZ’s current ROE is -45.71%, which justifies their rank of 2 — Weak. ROE shows us how good (or bad) a company is at using their shareholders funds to generate money (returns). ROE is most useful when compared against the industry average, which is currently 8.21%. Since SKLZ’s ROE is so bad, and far below their peers’ average, their ranking should be a 1 — Very Weak.
Lastly, SKLZ stock has a P/E rating of 1 — Very Weak. SKLZ stock price to earnings ratio is currently -2.43 which justifies their rank of 1 — Very Weak. Price to Earnings is the most commonly found financial metric and is best used when comparing a company’s p/e to the industry average. SKLZ operates in the Electronic Gaming & Multimedia industry, which currently has an average P/E of 5.34. This rating of 1 makes a lot of since due to SKLZ having a negative P/E and their peers having a postitive P/E.
Overall, based on the 3 previously mentioned fields, SKLZ stock has been given a comprehensive rating of 2 — Weak. This rating implies that they might be struggling financially.
SKLZ Stock Forecast and Valuation
The Latest SKLZ Stock Ratings
As we know, SKLZ stock has been given an overall rating of 2 — Weak This implies that SKLZ might not fundamentally and is not a good candidate for being “undervalued”. With this in mind, let’s proceed.
SKLZ Stock Forecast Using Comparable Analysis
- Price to Book (P/B): SKLZ’s current P/B ratio is 1.22, compared to the average P/B ratio of SKLZ’s peers being 4.56. This implies that SKLZ is undervalued and their share price should change by a factor of 274.81% to be at fair value (based on SKLZ’s P/B compared to the P/B of their peers).
- Price to Equity (P/E): SKLZ stock P/E ratio is currently -2.43, compared to the average P/E ratio of SKLZ’s peers being 5.34. This implies that SKLZ is overvalued and their share price should change by a factor of -319.65% to be at fair value (based on SKLZ’s P/E compared to the P/E of their peers).
Overall, SKLZ stock is overvalued and needs to experience a change in stock price of (an average of) -22.42% to be considered “at fair value”. This SKLZ Stock Forecast is skewed as a result of SKLZ’s odd financial ratios.
Is SKLZ Stock a Buy or Sell?
Overall, due to the overall stock rating of 2 — Weak (Based off of DCF, ROE, and P/E), as well as the fact that a comparable analysis (P/E and P/B) found that SKLZ was overvalued and need to experience a price change of -22.42% in order to be at their fair value, I have concluded the following:
SKLZ stock is overvalued, and their financials are not very good. As a result, I would consider taking a bear position (if any) and look for a 10–15% drop (to be conservative)
Originally published at https://utradea.com.
