Jefferies analyst Andrew Uerkwitz offers high praise for Skillz but is concerned about the stock's valuation.
“We see Skillz building a differentiated, innovative platform for mobile gaming,” he wrote in a commentary.
“It's an evolution in monetization focused on competitive play that we believe will have a long tail of faster-than-market growth.
"Moreover, with potential near-term catalysts related to expanded revenue streams, more titles, and new game features, there is a lot to like.”
The downside: “[We] sit sidelined on valuation,” Uerkwitz said.
Skillz recently traded at $17.47, up 5.4%. It has jumped 40% in the past six months as investors were enthusiastic about gaming stocks, since so many players were stuck at home during the pandemic. But it has dropped 60% from its Feb. 5 high.
As for Uerkwitz’s bullish case, “Skillz boasts some of the best mobile-game-user metrics with leading payer-conversion rates,” he said.
“While the current user base is small relative to other public mobile-gaming companies, Skillz is attacking the same addressable market by providing a better way to monetize users.”
Skillz shares gained Thursday after Cathie Wood's ARK Investment Management bought shares of the e-sports platform.
On Wednesday, ARK Innovation ETF bought more than 4 million shares and ARK Next Generation Internet ETF bought more than 1 million shares.
Last month, Skillz priced a public offering of 32 million shares. The proceeds will go to working capital and general purposes.