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.

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.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Skillz Inc. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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