- SKLZ bounded past its local high in premarket and June 8 open.
- Bounce comes after market approval of Aarki acquisition.
- Skillz shares will next target $25.73.
Skillz stock (NYSE: SKLZ) pounced another 6% at the market open on Tuesday, June 8. This pushes the shares well above the local high from June 2 of $23. SKLZ shares started the week on a high note, jumping 8.7% on Monday after a wild June 2 session when the stock popped 27% after announcing the close of the acquisition of digital marketing platform Aarki for $150 million. Shares were up 2% in Tuesday’s premarket to $22.53.
Skillz acquisition: Why the market loves the Aarki buyout
Although young, Aarki already had $30 million in fiscal 2021 revenue from its demand-side market platform that pairs advertisers with game developers. This means that Skillz is only paying about five times sales. Additionally, the acquisition will likely save SKLZ plenty of money since it can use the platform to market its own mobile gaming and betting platform. Marketing cost the company more than $96.3 million in the first quarter, and to meet the company’s full-year outlook of $375 million for the year, it will need to spend plenty more on ads.
“Aarki’s proven machine learning will pair with Skillz’s robust first-party data to create an unrivalled value proposition for game developers,” said Skillz CEO Andrew Paradise. “The integrated ecosystem will unlock new points of connectivity between consumers, developers and brands, pairing the right impression with the right user at the right time, all while delivering a superior user experience.”
SKLZ chart: Technicals give investors hope
Skillz shares were stuck in a descending channel since February 5 on the daily chart. SKLZ broke above the pattern on April 26, however, and then rode the top trend line of the channel as support before forming a double bottom in the area including $12.40 and $12.72. From there, it drove higher to surpass the local high of $21.69 from April 27. Closing above the June 3 high of $23 would continue the bull run. Support can currently be found at the point where the 20-day Simple Moving Average (SMA) crossed over the 50-day SMA at $17.09 in Tuesday’s premarket. This sign is most likely what caused traders to continue pumping the stock.
SKLZ daily chart
At 69, the Relative Strength Index (RSI) will likely face a slowdown or correction sometime this week since it is nearing overbought territory. Of course, during its December 8 and February 5 pinnacles on the RSI chart, both declines coincided with 83 RSI readings, so merely entering overbought territory may not be significant. At this point, the next bull target is likely $25.73, the close from March 19 that finds support all the way back in mid-January. Above that is the March 16 close of $30.69.
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