3 Reasons Investors Should Worry About Skillz's $9 Billion Valuation
Great potential doesn't always equal automatic success. Skillz (NYSE: SKLZ) is an esports company that offers mobile skill-based games, sometimes played for money. The company doesn't own or produce the games; instead, Skillz is the mobile landlord, handling the money and the process of matching players. The esports company reports earnings soon, and investors seem to be expecting big things. The shares are up significantly since their IPO, yet Skillz's business moat seems questionable. Competition in mobile gaming is fierce, and Skillz asks developers to pay a heavy price to try to rise above the noise. Investors may want to take some of their holdings off the table, instead of betting on this company's continued growth.
The first challenge facing Skillz is its heavy reliance on just three games for most of its revenue. In the company's stock registration statement, Skillz said that in the nine months ended Sept. 30, 2020, 63% of its revenue came from Tether Studios, known for Solitare Cube and 21 Blitz games. Another quarter of Skillz's revenue came from Big Run Studios and its Blackout Bingo game. Without these three games, Skillz would be left with just 12% of its historical revenue.
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Source Fool.com
