Esports stock Skillz Inc (US:SKLZ) has been making headlines this Easter weekend; recently its CEO and founder, Andrew Paradise, disclosed that he had made a significant share purchase in the trading window post fourth-quarter earnings.
The news of the purchase sent shares soaring by 24.46% on Thursday, prior to the long weekend.
Skillz is a San Francisco-based competitive multiplayer mobile video game platform that allows users to compete in a number of global competitions against other players.
The transactions were initially spotted on Fintel’s latest CEO purchases page, late on Thursday evening.
Despite the rally, Skillz shares are trading well below the initial SPAC merger price of $10 last seen in mid-2020 and significantly below its all-time high of $46 hit in February of 2021.
In the filing, Andrew Paradise disclosed that he purchased 1.5 million shares on Wednesday at 55.75 cents per share, slightly above the stock’s lowest point in its short history. The transaction was worth a total of $836,000 and is the only insider purchase made in the stock over the last year.
Investors were pleased to see the Skillz CEO purchasing the company’s shares with his own capital, as it demonstrated his commitment to the business and belief in its growth potential.
Fintel’s insider sentiment quant score of 87.29 is bullish on SKLZ shares as it ranks the company in at number 215, or in the top 1.5%, of 14,947 globally screened companies for the highest levels of insider buying activity.
Paradise’s purchase equated to 0.503% of the total share float and boosted his equity stake to about 2.55% in the company.
Post-Pandemic Weakness
For some comparison, the stock has experienced weak and declining institutional interest since its peak early in the Pandemic. This is illustrated by Fintel’s bearish fund sentiment score of 14.60, which ranks the stock in the bottom 5% out of 36,459 screened securities. The model incorporates the total number of owners, changes in portfolio allocations and other metrics.
Filings show 305 institutions own 155.75 million shares of SKLZ stock. Some of the largest shareholders include ARK Investment Management, Atlas Venture Associates, Wildcat Capital Management, Renaissance Technologies, Geode Capital Management and Coastal Bridge Advisors.
For the Final quarter of 2022, Skillz reported a 57% decline in revenue to $46.9 million, slightly missing market consensus expectations.
Adjusted EBITDA losses narrowed significantly from $79.5 million in the final quarter of 2021 to a loss of $9.5 million in 2022 as total costs and expenses were reduced significantly. The result was better than expected.
On the bottom line, net losses widened from $100.4 million to $143.5 million as a result of a significant goodwill impairment worth $117 million during the quarter. The result equated to a loss of 34 cents per share, almost 3x worse than analysts expected.
On the March 30 conference call, SKLZ’s President Jason Roswig said, “We had a very successful effort in gradually reducing our user acquisition spend to a level that we believe will prepare us for profitable growth going forward.”
Profitability Progress
Wedbush analyst Michael Pachter highlighted in a report post results that he believes the esports company is continuing to make progress on its path to profitability. The analyst is forecasting revenue and adjusted EBITDA to stay relatively stable over the next few quarters and maintained his $3.75 target price and ‘outperform’ call on the stock.
Wedbush is one of the more bullish analysts in the market with other firms having a ‘hold’ or ‘sell’ view on the stock. Fintel’s consensus target price of $0.95 suggests analysts think the stock could recover a further 39% this year.
A chart from Fintel’s forecast page for SKLZ shows market sales expectations for the next five years. Analysts’ on average expect sales to continue to moderate over 2023 before returning to a path of growth from 2024 onwards.
With SKLZ’s share price down 74% over the past year, the move has been seen as a positive development for the stock, however it is still too early to confirm if the stock’s medium-term momentum trend has changed yet. For comparison, the 52-stock exchange-traded fund Pacer BlueStar Digital Entertainment ETF (US:ODDS), is up less than 1% in the same 12 month period. SKLZ shares make up 0.58% of the fund’s gaming, gambling and digital entertainment stocks portfolio.
This article originally appeared on Fintel
Sponsored: Find a Qualified Financial Advisor
Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to 3 fiduciary financial advisors in your area in 5 minutes. Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests. If you’re ready to be matched with local advisors that can help you achieve your financial goals, get started now.
