What happened
Shares of the mobile gaming platform company Skillz (SKLZ 1.49%) jumped 16.2% this week, according to data from S&P Global Market Intelligence, as investors flooded back to the stock after the Federal Reserve increased interest rates by just 25 basis points earlier in the week.
While Skillz's recent share price surge easily outpaced the S&P 500's 2.6% gains this week, the video game stock is still down 77% over the past year.
So what
High inflation and fears of recession have plagued the market over the past year, and the share prices of small growth companies like Skillz have been particularly hit hard.
Image source: Getty Images.
The Fed's significant interest rate hikes have made borrowing costs higher for companies and investors have feared that ongoing aggressive rate hikes could end up tilting the U.S. economy into a recession.
But with the Fed's decision to increase the federal funds rate by just 25 basis points this time, some investors are hoping that the worst fears about out-of-control inflation may be in the rearview mirror.
That optimism caused some Skillz investors to pick up shares of the beleaguered stock this week.
Now what
While Skillz got a boost this week, it may be too early to say that the stock is rebounding.
The company reported a non-GAAP (adjusted) loss of $0.19 per share in the third quarter, which was worse than analysts' consensus estimate of a loss of $0.13 per share and down from earnings of $0.13 in the year-ago quarter. Revenue was also in bad shape as it declined 41% to $60.2 million.
Investors will get a better picture of how the company is doing when it reports fourth-quarter results, likely later this month or in early March (the company has yet to announce the exact date).
But investors may not want to hold their breath hoping for a massive turnaround. The company was sitting on a significant amount of long-term debt -- $272 million at the end of the third quarter -- and it could a while (if ever) before the company can turn around its losses.
