Upon its merger with special purpose acquisition company (SPAC) Flying Eagle Acquisition, Skillz (NYSE:SKLZ) was introduced to the trading community and a wild, volatile ride began for SKLZ stock holders.
You might say that history was made because Skillz was actually the first publicly traded mobile e-sports platform.
At the time of the merger, Skills founder and CEO Andrew Paradise declared, “We stand at the intersection of mobile gaming and esports, perhaps the two most exciting growth opportunities of the next decade.”
That’s an awfully bold statement, and some skeptics might disagree. One notable investor, however, is leaning bullish and taking a long position – and maybe you should, too.
A Closer Look at SKLZ Stock
For much of 2020, SKLZ stock gradually taxied down the runway, so to speak. Prior to the big liftoff, the share price stayed close to $10 for a while.
Towards the end of the year, the bulls finally started to show signs of life. November and December were particularly strong months, with Skillz shares ending 2020 at around $20.
The momentum continued into the new year, with SKLZ stock topping out at a 52-week high of $46.30 on Feb. 5, 2021. Unfortunately, gravity started to take hold after that.
The share price slid during the next couple of months, landing at $18.17 on April 23.
Perhaps if stock traders discerned the real value of Skillz as a disruptive business – and if a famous investor happened to take a sizable stake – then a major turnaround might be right around the corner.
The Wood That Built the Ark
When ARK Investment Management CEO and CIO Cathie Wood talks, people listen. There aren’t many investors who are bona fide household names, but she’s one of them.
Wood’s company is known for building funds that invest in companies with disruptive potential. Some of those companies are under the radar and therefore could provide spectacular returns.
Of course, there’s risk involved in owning under-the-radar names. Yet, it’s Wood’s fearlessness that seems to appeal to so many of today’s young, bold traders.
Now, I’m certainly not suggesting that you should buy a stock simply because a famous fund manager likes it. Nevertheless, Wood’s stamp of approval might offer an added incentive to add Skills to your portfolio.
Reportedly, ARK Investment’s funds recently added more than 5 million shares of SKLZ stock. That surely says a lot about Wood’s outlook on Skillz as a business.
As we might expect, the share price moved higher after this news item was released to the public. Still, the stock has plenty of room to the upside and, as we’ve seen, has demonstrated the ability to go much higher.
What’s in the Sauce?
Now, let’s veer away from ARK and Wood, and towards Skillz and what the company has to offer.
After all, if you’re going to invest in a company, you should be able to identify something that differentiates it from the competition. We might call this the “secret sauce.”
Okay, I’ll admit it. I’m totally stealing that phrase from InvestorPlace contributor Luke Lango, who blew me away with his take on SKLZ stock.
To give you a primer on what Skillz does, the company “offers software that helps take a regular mobile game and turn it into an esports phenomenon,” according to InvestorPlace contributor Sarah Smith.
Moreover, Skillz “helps host tournaments and also produces gameplay clips and highlights.”
This is undoubtedly a smart niche market to be involved with in a time when mobile gaming and e-sports are ultra-popular.
There’s already some secret sauce there, but informed investors should want more flavor. For that, I’ll turn back to Lango, who pointed to Skillz’ proprietary anti-cheat algorithm.
This is an essential, value-added component of Skillz’ platform because it “keeps these games fair” as unfortunately, cheating is common in mobile e-sports.
The Bottom Line
Between Wood’s stamp of approval and the tasty anti-cheating secret sauce, a compelling bull thesis could be built around Skillz today.
And with lots of room for upside, SKLZ stock could add some spice – and admittedly, a dash of volatility – to your portfolio.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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SKLZ shares fell $0.02 (-0.11%) in premarket trading Monday. Year-to-date, SKLZ has declined -9.95%, versus a 11.85% rise in the benchmark S&P 500 index during the same period.
About the Author: David Moadel
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. More...
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