Shares of Skillz (NYSE:SKLZ) opened down 38% this morning after the company reported fourth-quarter earnings. Even worse, SKLZ stock has lost some 90% of its market capitalization in the past year. The video game platform reported revenue of $108.8 million for the quarter, up 61% year-over-year (YOY). However, that revenue figure missed analyst estimates of $114.1 million. The growth in revenue was aided by an increase in paying monthly active users, which grew 56% YOY to $610,000. Furthermore, the company reported a net loss of $99 million during the quarter, which was an increase from the $67 million net loss in the prior-year quarter.
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So, why is SKLZ stock down so much? The blaring reason is that Skillz is spending a truckload of money on marketing expenses. Sales and marketing expenses totaled $155.1 million, which was more than the revenue that the company brought in during the quarter. In addition, investors weren’t satisfied with the guidance that the San Francisco-based company reported. Full-year 2022 revenue guidance came in at $384.1 million, missing analyst estimates of $389 million. Skillz CEO Andrew Paradise commented on the company’s future plans:
“Last year, we made substantial investments in our infrastructure necessary to build the competition layer of the Internet […] We are now entering a new phase, where we will shift focus to profitable growth through improving marketing efficiency, and deploying fewer but more impactful product features.”
So, with the poor earnings results in mind, let’s take a look at how Wall Street feels about SKLZ stock.
Analysts Weigh in on SKLZ Stock Price Predictions
- RBC Capital has a price target of $17. Analyst Brad Erickson defines Skillz as a “differentiated mobile gaming platform” that has access to a $90 billion total addressable market (TAM). The analyst believes that this TAM will grow to $148 billion over the next five years. Erickson also notes that the company’s business model has yet to show success, which may be subject to investor scrutiny in the near term.
- Jefferies has a price target of $17. Analyst Andrew Uerkwitz believes that Skillz’s platform focused on competition will grow faster than other peers in the industry. In addition, the analyst notes that catalysts like “expanded revenue
streams, more titles, and new game features” may bolster the potential of SKLZ stock.
- Finally, Citi has a price target of $9. Analyst Jason Bazinet believes that the company has a “pristine” balance sheet as well as plenty of monetization opportunities. Furthermore, the analyst believes Skillz can grow revenue at 45% until 2023.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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