Please ensure Javascript is enabled for purposes of website accessibility

Why Skillz Stock Just Skyrocketed

By Jon Quast - Updated Feb 4, 2021 at 10:18AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

With the possibility of adding NFL games to its platform, perhaps the company can mitigate one of its biggest risks.

What happened

Shares of video game platform Skillz (SKLZ 8.98%) skyrocketed Thursday after the company announced it had gained a new partner with enormous brand recognition. The NFL wants to grow its audience among gamers on mobile devices, and it believes Skillz is the right platform to accomplish its goal. With this fresh vote of confidence, Skillz stock was up 18% as of 10 a.m. EST.

So what

Skillz is merely a software platform. Third-party developers create games to be played on Skillz. And gamers enjoy the chance to compete for cash prizes. Its user engagement is impressive -- gamers log an average of 62 minutes daily on the Skillz platform. However, the company has an urgent need for new games. According to the company, just three games (Solitaire Cube, 21 Blitz, and Blackout Bingo) accounted for 79% of revenue for the first three quarters of 2020.

A businessman rides a rocket ship expelling cash exhaust over a multi-colored bar chart.

Image source: Getty Images.

I don't believe this point can be overstated. Having that much revenue come from just three games is a big risk for Skillz. After all, if it fails to replace popular games as interest fades, then its user engagement could tank. That's why signing a deal with the NFL is so important. It offers the opportunity to diversify revenue to a broader base of games.

Now what

Skillz shareholders should keep in mind that this news won't immediately help the business. The two companies have simply issued the challenge to game developers. But these third-party studios will still have to go through the process of creating skills-based games based on the popular sport. There's no telling how long it will take to finally see an NFL game launch on Skillz. However, for now, it's good news that it's at least started the process.


Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Skillz Inc. Stock Quote
Skillz Inc.
$1.82 (8.98%) $0.15

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.