Here’s a bit of trivia for you. Upon its reverse merger with special purpose acquisition company (SPAC) Flying Eagle Acquisition, Skillz (NYSE:SKLZ) actually became the first publicly traded mobile esports platform. You won’t find Flying Eagle on the stock market anymore — if you’re not familiar with SPACs, they’re “shell companies” that exist to merge with an existing company looking to go public.
The former high flyer stock had the makings of a meme-stock runner in February. I can’t prove that Reddit users were involved, but I have my suspicions.
Today, SKLZ stock is trading at a heavily discounted price point. But it appears to be regaining lost ground, so momentum traders don’t need to worry about catching a proverbial falling knife.
Meanwhile, Skillz continues to provide a front-row seat to the mobile gaming market — and a value-added acquisition could offer the stakeholders exposure to the machine-learning market.
A Closer Look at SKLZ Stock
Let’s rewind to an earlier time. Back in May, 2020, SKLZ stock (previously known as FEAC stock) was trading near $10 — not unusual for an early-stage SPAC stock.
SPACs were red-hot in the markets back then. So it shouldn’t be too surprising that the stock climbed to $20 by the end of 2020.
That wasn’t the end of the good news. Impressively, FEAC/SKLZ stock rallied further to a 52-week high of $46.30 on Feb. 5, 2021.
But then a sharp decline ensued. Did the mobile e-gaming market collapse? Not at all; a deflation of the SPAC bubble was a more likely culprit. Painfully, SKLZ stock bottomed out at $12.40 in mid-April.
There have been signs of a recovery since that time, though. Shares closed at $20 and change on July 1. It looks like the worst might be over, and the bulls may be back in control of the price action.
The Games People Play
Mobile gaming is the future of entertainment. Or at least, that’s what Skillz says in its investor presentation.
It’s an advertising slogan, but I tend to agree with the gist of what Skillz is saying. During the onset of the Covid-19 pandemic, stay-at-home entertainment often meant playing video games on mobile phones.
Evidently, investing in Skillz means taking a stake in a burgeoning industry. According to the company, the $86 billion mobile gaming market represents 23% of the overall gaming market.
Skillz estimates that 57% of its target market is female. Clearly, it’s time to jettison the stereotypes and focus on the data, which suggests that mobile gaming can be enjoyed by practically everyone.
The fiscal data also supports Skillz as a serious contender in a fast-expanding market.
Here’s the lowdown: for the first quarter of 2021, Skillz reported $84 million in revenues, up 92% year-over-year. The company also recorded 81% year-over-year growth in paying monthly active users.
Broadening the Footprint
With that growth in mind, the outlook remains optimistic as Skillz raised its full-year 2021 revenue guidance to $375 million.
Investors really couldn’t ask for more proof that the company is executing on its mission to revolutionize the e-gaming market.
Still, Skillz continues to push the envelope. In a recent development, the company announced that it has entered into an agreement to acquire leading technology-driven marketing platform Aarki.
By deploying Aarki’s advanced advertising capabilities, Skills hopes to broaden its already considerable footprint within the mobile gaming industry. This move is quite savvy, as Aarki effectively utilizes artificial intelligence (AI), also known as machine learning.
Concerning Aarki’s value proposition, Skillz CEO Andrew Paradise provides a better explanation than I ever could.
“Aarki’s proven machine learning will pair with Skillz’s robust first-party data to create an unrivaled value proposition for game developers,” Paradise said.
Aarki CEO Levon Budagyan follows up on Paradise’s point, saying, “Harnessing the combined power of our data science platforms will further increase our industry-leading performance marketing.”
The Bottom Line
It makes perfect sense for Skillz to broaden its industry footprint through Aarki’s AI-driven market insights.
And with that, SKLZ stock has the potential to evolve from a has-been SPAC play to a long-term winner in the esports niche.
On the date of publication, David Moadel did not have (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.
David Moadel has provided compelling content — and crossed the occasional line — on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.
Credit: Google News