On Friday, Stifel adjusted its financial outlook for Skillz Inc. (NYSE:SKLZ), a mobile gaming platform company, following the release of their third-quarter earnings. The firm's analyst revised the price target downward to $6.00 from the previous $7.00 while retaining a Buy rating on the stock.
The adjustment comes after a detailed review of Skillz's business model and earnings. The company's third-quarter results, which were disclosed after the market closed on Thursday, prompted Stifel to revise its estimates. The firm now anticipates a larger adjusted EBITDA loss for Skillz in 2024, forecasting a shortfall of $57 million compared to the earlier estimate of a $46 million loss. The projected GAAP revenue for 2024 has also been reduced to $99 million, indicating a year-over-year decline of 34%, from the previously estimated $111 million.
Looking further ahead to 2025, Stifel's updated figures suggest that Skillz's financial situation may improve, albeit the anticipated adjusted EBITDA loss is still significant at $34 million. This revised estimate is a deeper loss than the prior forecast of a $10 million shortfall. However, the revenue outlook for 2025 is somewhat positive, with an expected increase of 15% year-over-year to $114 million, though this is down from the former projection of $127 million.
In other recent news, Skillz Inc. reported its Q3 2024 financial results, revealing stable monthly active users (MAUs) and a 25% year-over-year improvement in adjusted EBITDA loss, now standing at $13.9 million. The company's revenue, however, saw a 33% decrease compared to the same period last year, with a total of $25 million. Despite this, Skillz Inc. has made strides in reducing its operating expenses across R&D, sales, marketing, and G&A.
The company's CEO, Andrew Paradise, expressed confidence in the company's path towards consistent growth and profitability by 2025. This is expected to be achieved through a focus on enhancing the platform, organizational improvements, optimizing user acquisition spending, and a clear path to profitability.
In other developments, Skillz Inc. is actively addressing compliance with NYSE listing standards and finalizing its unaudited interim financial statements. Furthermore, Skillz Inc. is exploring publishing deals to increase revenue share and support marketing budgets for promising games.
InvestingPro Insights
While Stifel maintains a cautiously optimistic outlook on Skillz Inc. (NYSE:SKLZ), recent InvestingPro data provides additional context to the company's financial situation. As of the last twelve months ending Q3 2024, Skillz reported a revenue of $106.2 million, with a concerning revenue growth rate of -36.73%. This aligns with Stifel's revised projections for declining revenues in the near term.
Despite these challenges, InvestingPro Tips highlight some positive aspects of Skillz's financial position. The company holds more cash than debt on its balance sheet, which could provide some financial flexibility as it navigates through its current difficulties. Additionally, Skillz boasts impressive gross profit margins, with the latest data showing a gross profit margin of 87.17% for the same period.
It's worth noting that Skillz is currently trading at a low Price / Book multiple of 0.46, which may interest value investors. However, this should be weighed against the fact that the company is not profitable over the last twelve months, as indicated by another InvestingPro Tip.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for Skillz, providing a deeper understanding of the company's financial health and market position.
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