Why Skillz Stock Had Another Roller-Coaster Ride on Thursday


What happened

Cathie Wood strikes again! After it became known that the celebrated investor had plowed more money into Skillz (NYSE:SKLZ) on Wednesday, shares of the company shot nearly 17% higher Thursday, before sinking well below the waterline and eventually rising to end the session only 1.1% lower.

So what

Two of Wood’s exchange-traded funds (ETFs), ARK Innovation (NYSEMKT:ARKK) and ARK Next Generation Internet (NYSEMKT:ARKW) added more shares of Skillz to their portfolios. The former bought over 4 million shares, and the latter picked up more than 1 million.

Young man playing game on smartphone.

Image source: Getty Images.

Many people follow Wood in her stock-buying. In this case, some of them might have grabbed Skillz on the news only to sell it off almost immediately on the bounce for a quick and easy profit.

The company’s fundamentals could also have contributed to driving Skillz shares back down — they are not inspiring. Granted, it’s a relatively early-stage tech company (specifically, a mobile sports video games platform developer), so bottom-line losses are almost expected. However, many analysts believe the red ink will continue to spill throughout this year, at least.

Skillz’s cash burn is high, and an ambitious international expansion program could exacerbate that problem if it doesn’t produce results.

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Now what

Mobile gaming is indisputably a hot space for investors, as it’s poised to grow dramatically. (Just think — do you know anyone without a smartphone these days?) Skillz is an interesting play on that opportunity, but it hasn’t yet proven it can execute profitably on its potential. Regardless, it’ll be a stock to watch, particularly given the promise of its industry.

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.

View more information: https://www.fool.com/investing/2021/04/22/why-skillz-stock-had-another-roller-coaster-ride-o/

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