With its performance in recent days, it may seem like Skillz (NYSE:SKLZ) stock has finally bottomed out. Since falling to prices as low as $2.07 per share, SKLZ stock has jumped around 57%, up back to around $3.39 per share.

For those who got in at or near its bottom, that’s a big gain in a short amount of time. For those holding shares in this operator of a cash competition mobile gaming platform for an extended period of time? This spike hardly means anything.

Not when you got in at $5, $10, or even $26.55 per share. Those are all prices it’s traded for in the past 12 month, a period in which it has experienced a consistent drop in price.

What’s driving this latest run-up? Chances are, it’s made up of the latest round of bottom-fishers, getting in at a price that’s seemingly cheap. In the hope any news is good news. Yet as the main reason behind its high double-digit price decline in the past year continues to affect its performance, little indication when/if it will be resolved?

Buying it today is little more than a gamble. With better options out there, with rebound potential based less on chance and more on fundamentals, there’s little reason to play games with this stock.

SKLZ Stock and Recent News

Skillz may have just experienced a boost in price. Again, possibly due to new bottom-fishers jumping into it. Also, the fact it has a high amount of short-interest may be playing a role too, but it’s not for certain. With around 18% of outstanding float sold short as of Feb. 28, some may be buying it as a squeeze. Others who shorted it at much higher prices may be covering their positions.

Whatever the reason, I wouldn’t read too much into this. Much less, view it as a reason to buy SKLZ stock. Instead, I would pay more attention to what drove its last big move, which was in the wrong direction. I’m talking about the release of its most recent earnings report on Feb 23, and the nearly 20% drop caused by it on the same day.

Taking a look at these numbers, the market’s reaction was appropriate. Although it reported high revenue growth for both the December quarter (Q4 2021) and the full year (61%, and 67%, respectively), the rest of the numbers were definitely not cause for celebration. Despite the jump in revenue growth, net losses went up sharply for both Q4 and FY2021.

Even worse was Skillz’s revenue outlook for 2022. Guiding revenue of $400 million, this number is well below the $548.78 million Wall Street analysts were anticipating for this year. Now, there’s a reason behind this big walk back of its growth projections: a reduction in its marketing spend. Yet while I’ve stated before it’s good the company is moving beyond its past customer acquisition strategy, based on its profitability outlook, this cost-cutting measure does little to improve the overall fiscal picture.

There’s Still an Uncertain Path Out of the Red

It would be one thing if Skillz was sacrificing revenue growth for a path to profitability. But that’s not what’s going on here. During this year, the company is cutting marketing spend as a percentage of revenue from 49% to 39%. In other words, a $32.2 million drop, from around $188.2 million, to around $156 million.

However, comparing adjusted EBITDA margins from 2021 against expected adjusted EBITDA margins for 2022? All this is doing is reducing its losses by a slightly higher amount. For 2022, adjusted EBITDA margins are expected to come in at -37%, or -$148 million. In 2021, this figure came in at -49%, or -$188.2 million.

A step in the right direction, yes. Something that changes my view on SKLZ stock? No. Instead, with its change in strategy both negatively impacting revenue growth, while doing little to reduce losses, the company is getting the worst of both.

Yes, I’ll admit that slashing costs isn’t the only tactic the company is employing to turn itself around. Skillz is also putting a lot of effort into improving the quality of the games it offers on its site. Still, until it starts showing up in the fiscal data, that lower marketing spend plus better games is resulting in narrower losses, and a path to profitability? I wouldn’t buy it solely on the chance of this playing out.

The Bottom Line

Earning an “F” rating in my Portfolio Grader, Skillz may build its business around offering players the ability to play games of skill for cash prizes. But when it comes to investing in its shares? It’s a game of chance.

Per its own forecasts, slashing marketing spend will only modestly lower its losses. All at the cost of revenue growth. With more heavy cash burn ahead, and little indication of when the situation will improve, steering clear of SKLZ stock remains the best move.

On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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