What happened

Shares of esports platform provider Skillz, Inc. (NYSE:SKLZ) are soaring in afternoon trading Monday, up 8.2% as of 2:20 p.m. EST.

You can thank Citigroup for that, because this morning, the megabank announced it is initiating coverage of recent SPAC IPO Skillz with a buy rating and a $27 price target.  

Rising red stock arrow representing a stock going up drawn on a yellow background

Image source: Getty Images.

So what

Skillz's esports gaming platform, argues Citi in a note covered on TheFly.com this morning, is "unique" among gaming platforms and offers "compelling" economics and a "wide array" of ways to monetize it, while the company that owns it boasts a "pristine" balance sheet.

As the company adds users, says Citi, Skillz should be able to grow its top line at a 45% annual clip through at least 2023.

Now what

And that's just the base case for Citi's buy rating. According to the analyst, Skillz also has "five potential incremental growth drivers" that could enable it to grow even faster -- and make its stock worth even more. Those growth drivers are:

  • Adding additional game genres such as first-person shooters.
  • Attracting sponsorship to offer more brand-sponsored prizes.
  • Expanding gaming opportunities onto Android in the U.S.
  • Expanding internationally.
  • Selling ad space on the platform.

Although the analyst isn't relying on these to establish its initial price target, if any or all of them happen, Citi would say they justify an even richer valuation for the stock. For each and every one of these boxes Skillz manages to tick, Citi suggests investors add another "between $1 and $5 to our target price."

No wonder investors are excited!

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.