Biggest issues facing Skillz Inc. as of today:
1. Valuation
With a current valuation around $8B on TTM revenues of $230M, the Price/Sales multiple rests at 32, which for context is higher than any company currently indexed the S&P 500 as well as within the Nasdaq 100. Simply put this company in relation to its revenue is E X P E N S I V E, but can it be justified? With only 1 quarter of public earnings on the table many investors simply dont know. FY'21 Q1 earnings should shed more light on 2021 projections, future growth and will be crucial to determining and or justifying its valuation.
2. Wolfpack Research Short Report
Wolfpack Research founded in 2019 notes itself as a financial research and due diligence investigation firm, helmed by Dan David; a Wall Street whistle blower well known for exposing many fraudlent chinese companies listed on US exchanges post the 2008 financial crisis. On March 8 Wolfpack released a report alledging that Skillz Inc.'s forecasted growth expectations are "entirely unrealistic", dog shit wrapped in cat shit if you will. The report further states that "its top games appear to be stagnant to declining, leading us to believe its revenue projections are farcical". The report also went on to claim that "Skillz’s top three games — which make up for 88% of its revenues — had already peaked by the third quarter of 2020 and its growth story is falling apart in the first quarter of this year." The most brazen allegation however is claiming the NFL partnership they announced on Feb 4th is far overstated in significance, value and potentially entirely fake. The stock has fallen 34% since the report surfaced as investors have certainly taken heed. This places even greater spotlight on FY'21 Q1 earnings as any declines in revenue growth/guidance would give legitimate claim to Wolfpacks allegations. On the contrary an increase in growth on strong guidance could potentially render this report as null.
3. Macroeconomic & SPAC related Headwinds
SPACs over the last 4 quarters have been all the rage on Wall Street and rightfully so as 2020 saw a 600% increase in capital rasied year in comparison to 2019. YTD 2021 SPAC related funds have raised $87.9B in capital already outpacing 2020 numbers. With recent FED talk of rising interest rates on the horizon many fear the true growth potential of other SPAC's like $SKLZ may not live up to their price tags, sending current investors fleeing to safer assets and keeping new money on the sidelines. A reversion to the mean is certainly to be exepcted.
Post Earnings
Bull Case - PT $24
Strong revenue beat above expectations indicating strong continued growth along with strong guidance for FY'21 and onward. Opens the door to back to $24 and onward.
Bear Case - PT $14
Revenue miss or in line with expectations along with muted to weak guidance. Opens the door to $14 and potentially lower.
1. Valuation
With a current valuation around $8B on TTM revenues of $230M, the Price/Sales multiple rests at 32, which for context is higher than any company currently indexed the S&P 500 as well as within the Nasdaq 100. Simply put this company in relation to its revenue is E X P E N S I V E, but can it be justified? With only 1 quarter of public earnings on the table many investors simply dont know. FY'21 Q1 earnings should shed more light on 2021 projections, future growth and will be crucial to determining and or justifying its valuation.
2. Wolfpack Research Short Report
Wolfpack Research founded in 2019 notes itself as a financial research and due diligence investigation firm, helmed by Dan David; a Wall Street whistle blower well known for exposing many fraudlent chinese companies listed on US exchanges post the 2008 financial crisis. On March 8 Wolfpack released a report alledging that Skillz Inc.'s forecasted growth expectations are "entirely unrealistic", dog shit wrapped in cat shit if you will. The report further states that "its top games appear to be stagnant to declining, leading us to believe its revenue projections are farcical". The report also went on to claim that "Skillz’s top three games — which make up for 88% of its revenues — had already peaked by the third quarter of 2020 and its growth story is falling apart in the first quarter of this year." The most brazen allegation however is claiming the NFL partnership they announced on Feb 4th is far overstated in significance, value and potentially entirely fake. The stock has fallen 34% since the report surfaced as investors have certainly taken heed. This places even greater spotlight on FY'21 Q1 earnings as any declines in revenue growth/guidance would give legitimate claim to Wolfpacks allegations. On the contrary an increase in growth on strong guidance could potentially render this report as null.
3. Macroeconomic & SPAC related Headwinds
SPACs over the last 4 quarters have been all the rage on Wall Street and rightfully so as 2020 saw a 600% increase in capital rasied year in comparison to 2019. YTD 2021 SPAC related funds have raised $87.9B in capital already outpacing 2020 numbers. With recent FED talk of rising interest rates on the horizon many fear the true growth potential of other SPAC's like $SKLZ may not live up to their price tags, sending current investors fleeing to safer assets and keeping new money on the sidelines. A reversion to the mean is certainly to be exepcted.
Post Earnings
Bull Case - PT $24
Strong revenue beat above expectations indicating strong continued growth along with strong guidance for FY'21 and onward. Opens the door to back to $24 and onward.
Bear Case - PT $14
Revenue miss or in line with expectations along with muted to weak guidance. Opens the door to $14 and potentially lower.
Comment:
Watching the 30 Mar low of $16.76. A break of that could spur some additional selling. However I still believe range bound movement between now and May is to be expected.