Spotting Winners: Skillz (NYSE:SKLZ) And Video Gaming Stocks In Q3

December 24, 2024 at 04:01 AM EST

SKLZ Cover Image

The end of the earnings season is always a good time to take a step back and see who shined (and who not so much). Let’s take a look at how video gaming stocks fared in Q3, starting with Skillz (NYSE: SKLZ).

Since videogames were invented in the 1970s, they have gradually taken more share of entertainment time. Ubiquitous mobile devices have powered a surge in “snackable” games that can be played on the go. Over time, games have developed more social engagement features where friends can play games together over the internet. The business models of games publishers have become less volatile due to digitization of distribution, in game monetization, and like Hollywood, an increasing dependence on surefire hit franchises. Covid driven lockdowns accelerated adoption and usage of videogames – a trend that has not slowed.

The 4 video gaming stocks we track reported a softer Q3. As a group, revenues were in line with analysts’ consensus estimates while next quarter’s revenue guidance was 3.3% below.

Thankfully, share prices of the companies have been resilient as they are up 7.7% on average since the latest earnings results.

Weakest Q3: Skillz (NYSE: SKLZ)

Taking a new twist at video gaming, Skillz (NYSE: SKLZ) offers developers a platform to create and distribute mobile games where players can pay fees to compete for cash prizes.

Skillz reported revenues of $24.56 million, down 32.6% year on year. This print fell short of analysts’ expectations by 7.9%. Overall, it was a disappointing quarter for the company with a decline in its users and a significant miss of analysts’ number of paying monthly active users estimates.

“Our third quarter operating performance was marked by continued execution on our strategic operating priorities as we further position Skillz to generate sustainable top-line growth and positive cash flow,” said Andrew Paradise, Skillz’ CEO.

Skillz delivered the weakest performance against analyst estimates and slowest revenue growth of the whole group. The company reported 121,000 monthly active users, down 28% year on year. Unsurprisingly, the stock is down 23.6% since reporting and currently trades at $4.31.

Read our full report on Skillz here, it’s free.

Best Q3: Take-Two (NASDAQ: TTWO)

Best known for its Grand Theft Auto and NBA 2K franchises, Take Two (NASDAQ: TTWO) is one of the world’s largest video game publishers.

Take-Two reported revenues of $1.35 billion, up 4.1% year on year, outperforming analysts’ expectations by 1%. The business performed better than its peers, but it was unfortunately a slower quarter with full-year EBITDA guidance missing analysts’ expectations.

Take-Two pulled off the highest full-year guidance raise among its peers. The market seems happy with the results as the stock is up 10.2% since reporting. It currently trades at $183.55.

Is now the time to buy Take-Two? Access our full analysis of the earnings results here, it’s free.

Roblox (NYSE: RBLX)

Best known for its wide assortment of user-generated content, Roblox (NYSE: RBLX) is an online gaming platform and game creation system.

Roblox reported revenues of $919 million, up 28.8% year on year, exceeding analysts’ expectations by 3.8%. Still, it was a slower quarter as it posted full-year EBITDA guidance missing analysts’ expectations and revenue guidance for next quarter missing analysts’ expectations significantly.

Roblox delivered the weakest full-year guidance update in the group. The company reported 88.9 million daily active users, up 26.6% year on year. Interestingly, the stock is up 37.7% since the results and currently trades at $59.45.

Read our full analysis of Roblox’s results here.

Electronic Arts (NASDAQ: EA)

Best known for its Madden NFL and FIFA sports franchises, Electronic Arts (NASDAQ: EA) is one of the world’s largest video game publishers.

Electronic Arts reported revenues of $2.03 billion, up 5.8% year on year. This print surpassed analysts’ expectations by 2.3%. However, it was a slower quarter as it produced EPS guidance for next quarter missing analysts’ expectations significantly and full-year revenue guidance meeting analysts’ expectations.

The stock is up 1.5% since reporting and currently trades at $147.81.

Read our full, actionable report on Electronic Arts here, it’s free.

Market Update

Thanks to the Fed's series of rate hikes in 2022 and 2023, inflation has cooled significantly from its post-pandemic highs, drawing closer to the 2% goal. This disinflation has occurred without severely impacting economic growth, suggesting the success of a soft landing. The stock market has thrived in 2024, spurred by recent rate cuts (0.5% in September and 0.25% each in November and December), and a notable surge followed Donald Trump's presidential election win in November, propelling indices to historic highs. Nonetheless, the outlook for 2025 remains clouded by the pace and magnitude of future rate cuts as well as potential changes in trade policy and corporate taxes once the Trump administration takes over. The path forward is marked by uncertainty.

Want to invest in winners with rock-solid fundamentals? Check out our Top 5 Growth Stocks and add them to your watchlist. These companies are poised for growth regardless of the political or macroeconomic climate.

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