What happened
Shares of esports platform Skillz (SKLZ 4.75%) fell 16.9% in November, according to data from S&P Global Market Intelligence.
Skillz had a busy month, which contained its third quarter earnings report, saw the departure of a senior company executive, but also saw a big insider buy. Yet much of its decline was likely tied to the sell-off in high-growth stocks over fears of rising interest rates.
Image source: Getty Images.
So what
On Nov. 3, Skillz reported earnings showing 70% revenue growth and a strong 47% growth in monthly active users (MAUs). Still, even that robust growth came in just shy of analyst expectations. Adjusted (non-GAAP) losses per share of $0.11 were slightly better than expected, as management touted improving sales and marketing efficiencies.
After a post-earnings dip, Skillz stock later surged after it was disclosed that CEO Andrew Paradise purchased nearly $5 million in stock on the open market on Nov. 8, at an average price of $11.54.
However, the post-CEO-buy bump was short-lived, when chief technology officer Miriam Aguirre departed the company after eight years on Nov. 19. However, the departure doesn't apparently have anything to do with disagreements with the company, as "health and well-being concerns" were cited as the reason for the departure.
Then toward the end of the month, concerns over a more hawkish Federal Reserve hurt growth stocks. Skillz is definitely that, as the company is still generating adjusted net losses today as it invests in its future. Higher interest rates could lead to a lower value assigned to future earnings, so it fell along with its peers.
Now what
Even after a big surge this week, one can still buy Skillz stock today for a much lower price than its CEO paid for the stock just a month ago. As of Tuesday's close, Skillz was trading at $9.55 per share, over 17% lower than Paradise's buy last month.
Skillz also isn't terribly expensive for a stock growing 70%, at just 8.6 times sales. Another attractive quality for Skillz is that it has incredibly high gross margins, since it merely acts as a platform linking game developers with players, and doesn't do a lot of game development itself. Last quarter, gross margins came in at a robust 92.5%.
I don't currently own Skillz shares, but with the CEO having made a large insider purchase recently, Skillz is definitely on my buy list heading into 2022.
