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Skillz Posts Larger-Than-Feared Quarterly Loss, Sales Outperform

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Skillz Inc. (SKLZ) reported a wider-than-expected loss in the first quarter, impacted by elevated costs and expenses. Shares of the online mobile video game platform declined more than 1% in the pre-market session on Wednesday.

Skillz incurred a loss of $0.15 per share in 1Q, compared to the loss of $0.06 recorded in the prior-year quarter. Analysts expected the company to report a loss of $0.10 per share.

Meanwhile, total revenue of $83.7 million surged 92% year-over-year and topped analysts’ expectations of $78.58 million. Notably, monthly active users (MAUs) came in at 2.7 million in the quarter, up 3.8%, while paying MAUs surged 81% compared to the same quarter last year. (See Skillz stock analysis on TipRanks)

Gross Marketplace Volume (GMV) grew 85% year-over-year in the quarter, while gross margin was 95%, up 100 basis points. However, total costs and expenses more than doubled from the prior-year quarter to $135.1 million.

Skillz CEO Andrew Paradise said, “We are proud to report record-breaking first quarter results, giving us 21 consecutive quarters of revenue growth. Our performance and strong growth trajectory gave us the confidence to increase investment in Q1 and raise full year revenue guidance to $375 million.”

For 2021, the company’s anticipates 63% year-over-year growth in total revenue to $375 million, which compares favorably with the consensus estimate of $369.2 million.

Following the 1Q results, Wedbush analyst Michael Pachter maintained a Buy rating and a price target of $34 (100.5% upside potential) on the stock.

According to Pachter, “Skillz is truly a platform, and that the platform will blossom into a successful and profitable business as it attracts games with increasingly larger user bases. To date, most of Skillz’s titles are launched on its platform (or have very small installed bases of players), and the company has had to spend a large amount per user to attract them to the platform. We envision a future where Skillz attracts games with existing user bases; by so doing, it can reaccelerate its MAU growth and we believe it will position the company to convert an ever increasing number of MAUs to paying users.”

The rest of the Street is cautiously optimistic about the stock with a Moderate Buy consensus rating. That’s based on 3 Buys versus 3 Holds. The average analyst price target of $28.50 implies 68% upside potential to current levels. Shares have increased 72.4% over the past year.

TipRanks data shows that financial blogger opinions are 85% Bullish on SKLZ, compared to a sector average of 67%.

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