SKLZ Stock Forecast: How High Can Skillz Go on Reddit Short Squeeze?

Mobile games platform Skillz (SKLZ) is the latest stock to make it to the “hall of frame” on Reddit group WallStreetBets. Currently, it's among the most popular names on the group, which is also reflecting in its price action. After the sharp gains on Aug. 31, the stock is also trading higher on Sep. 1. What’s the forecast for SKLZ stock amid the chatter of a short squeeze?

SKLZ went public in 2020 and capitalized on the massive investor appetite for new listings. The company opted for a SPAC merger to go public. It went on to hit a high of $46.30 in the first quarter of 2021 amid pumping from Reddit traders. However, like all other Reddit names, it tumbled thereafter. Currently, SKLZ trades at a premium of almost 20 percent to the SPAC IPO price.

In August, the stock tested the $10 price level after its earnings disappointed markets. It posted a wider-than-expected loss in the second quarter, which spooked investors. While markets welcomed loss-making companies in 2020, they haven’t been as welcoming of perennially loss-making companies in 2021 amid the sell-off in growth names.

In some of the Reddit stocks, especially the “poster boys” like GameStop (GME) and AMC Entertainment (AMC), the opinion of Wall Street analysts is at odd with Reddit traders. However, Wall Street and Reddit traders seem to be on the same page when it comes to Skillz stock.

According to the data compiled by CNN Business, SKLZ has a median target price of $16, which is a premium of almost 30 percent over its current prices. The street high target price for Skillz stock is a premium of over 100 percent. Among the six analysts covering the stock, three rate it as a buy and three rate it as a hold.

Cathie Wood is among the fund managers who are bullish on Skillz. The stock accounts for 1.3 percent of ARK Next Generation Internet ETF (ARKW) and 0.71 percent of the flagship ARK Innovation ETF (ARKK).

Most members on WallStreetBets have a positive opinion of SKLZ stock. A post on the group, doing a "DD" for the stock, termed it as “legit business” even though the post wasn’t too excited about Wood backing the company. The post also referred to the company’s strong balance sheet and said it doesn't have any debt and holds $700 million as cash.

WallStreetBets members are also discussing the company’s plans to enter the Indian market. Entry into India would expand the TAM (total addressable market) for Skillz and give it a footprint into one of the fastest-growing economies.

According to the data from Fintel, SLKZ had a FINRA short volume ratio of 54 percent on Aug. 31. Reddit traders have pounced on stocks with high short interest and triggered epic short squeezes. Short sellers have lost billions betting against names like AMC and GME.

Considering the “magic” WallStreetBets members have created in meme names, investors have bought any stock that gets popular on the group. That said, Skillz isn't the typical meme stock. It looks like a fundamentally strong company that can deliver strong returns in the long term.