$SKLZ was flying today. Easy DD

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Business Model

Unique mobile gaming platform, creating a win-win proposition for both gamers and developers. It has a high potential to generate a strong flywheel effect once it kicks off. Unlike other developers/platform, they don’t monetize via ads and in-game purchases

Continued/

They make money by taking a cut from the competitive game played between players. Have a 95% gross margin, and developers get a 25-30% cut of the GMV. They are making the casual games feel competitive and http://skill-based.In  turn, it makes the platform sticky

Industry/

Mobile gaming is forecasted to grow at 20% (faster than gaming).

The average time spent playing a video game is set to increase 1.1 hours per person to 1.5 hours in 2025.

The gaming industry is very fragmented, and $SKLZ can take advantage of this

Compelling Economics

4.7x LTV CAC
Low churn Rate
95% Gross Profit
Large TAM (E-sports)
88% sales growth

Strong future Optionality

Brand Sponsored Tournaments

Their app gets incorporated into Google Play

International expansion

New game genres (recently announced 3rd person)

Monetize non-paying customer maybe via Ad’s

Have economic MOAT

Network effect – fragmented market and first mover in e-sports
58 patents and billions of data points to catch cheat and frauds. Also, detect if games are skills-based or not.

Apart from Fed we also have company-specific risk here

Revenue Concentration Risk – 88% coming from Two developers

“For the 9 months ended September 2020 Tether and Big Run accounted for 63% and 25%, of their revenue”

Two pictures below in their presentation is just BS

Cash in 690m (SPAC)+ PIPE Proceeds 150m ~ 70% went into Pockets of Selling shareholder.

Game quality and diversity is a bit sad
Marketing is focused on user acquisition and not developer’s – No flywheel impact!
Can large Game Developers will build something similar?
Apple’s policy to let cash gaming apps be exempt from the take rate – May impose fees!

Valuation

On Relative metrics (Revenue growth vs Price /Gross Profit 2021) it's still cheap

Intrinsic value ( at current prices expensive)

According to our CAGR sensitivity analysis, if the growth rate increases from 41% to 61%, stock can more than 2X. So not all is lost - it depends if the company executes

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