5 Small-Cap Stocks to Sell Now Before Recession Begins

4. Skillz Inc. (NYSE:SKLZ)

Number of Hedge Fund Holders: 18 

Market Cap as of May 27: $655 million    

Percentage Decline in Share Price Year-to-Date: 74.67%

Skillz Inc. (NYSE:SKLZ) owns and runs a mobile gaming platform. On May 4, the firm posted earnings for the first quarter of 2022, missing market estimates on earnings per share by $0.19 and reporting a revenue of $93 million, up 11% compared to the revenue over the same period last year. The company said it expected to end 2022 with an earnings margin above 30% and a revenue of around $400 million, representing 24% year-on-year growth. The firm was founded in 2012 and is based in California. 

On May 23, Citi analyst Jason Bazinet downgraded Skillz Inc. (NYSE:SKLZ) stock to Neutral from Buy and lowered the price target to $2.10 from $5, noting that there were concerns around the “efficiency of sales and marketing spend” for the firm. 

At the end of the first quarter of 2022, 18 hedge funds in the database of Insider Monkey held stakes worth $154 million in Skillz Inc. (NYSE: SKLZ), the same as in the previous quarter worth $370 million.

Among the hedge funds being tracked by Insider Monkey, New York-based firm Wildcat Capital Management is a leading shareholder in Skillz Inc. (NYSE:SKLZ), with 21 million shares worth more than $64 million. 

In its Q3 2021 investor letter, Bireme Capital, an asset management firm, highlighted a few stocks and Skillz Inc. (NYSE:SKLZ) was one of them. Here is what the fund said:

“Another short position we initiated was in Skillz Inc. (NYSE:SKLZ), a mobile game publisher with $230m in 2020 revenue, and $98m of 2020 EBITDA losses. When we shorted it, SKLZ had a ~$6b valuation; it is now down to $4.5b, and we believe it has much more room to fall.

Skillz Inc. (NYSE:SKLZ) is a great example of investors getting hyped up over a quickly-growing company employing misleading industry jargon. In this case, the jargon is “eSports.” eSports is, in fact, a large and growing industry, and the term describes the business of competitive video games. Typically, this involves hosting tournaments, either live or online, where spectators can watch professional gamers compete at high levels. Prize pools are often in the millions. Ticket sales, sponsorships, and advertising revenue from such events totaled over $1b in 2020…” (Click here to see the full text)