Big tech names like Amazon, Netflix, and Microsoft all soared over the past couple of years since the 2020 lo2. However, tech giants weren’t the only companies able to achieve massive growth. Smaller tech companies were also able to deliver prolific revenue growth during these years.
Despite their initial successes, some of these smaller tech company’s stock came crashing down this year. These stock crashes come as quite the surprise, as many of the companies behind these crashing stocks are still producing massive revenue growth. Here are three top sold off stocks with massive growth?
Despite these stocks experiencing a significant decline in their price per share, their companies still seem to be financially growing and thriving. So what gives, and why are these growth stocks now crashing? To better examine this question, let’s look at the following three stocks and see if they are screaming buys now.
DraftKings
In 2012, the DraftKings company was founded by Jason Robins, Matt Kalish, and Paul Liberman.
DraftKings is an American sports betting or gambling company where users can make bets and gamble on fantasy sports and iGaming. When casinos were closed for health and safety reasons over the past few years, gamblers found an outlet on sites like DraftKings instead. That spurred a spike in sales. Revenue grew by 90% in 2020 and 111% in 2021.
DraftKings revenue spike initially drove share prices higher. However, DKNG is now seeing massive downfall in the price per share closing out the first quarter of 2022. During its short tenure as a publicly traded company, the share price has spiked and fallen much like a rollercoaster ride.
When DraftKings first began trading on the stock exchange, shares were trading at around $19 per share. In October 2020, DKNG was trading around $63 per share. In March 2021, DKNG hit an all-time high of $71 per share. As of March 2022, DKNG has a market cap of $7.8 billion and is trading under $20 per share.
Still, revenues are forecast to grow by almost 150% to $4.4 billion over the next 5 years. If those numbers materialize, DraftKings has all the hallmarks of a company that could revisit former highs in the next few years.
Skillz
Skillz was founded in March 2012 and serves as a mobile video game platform that allows users to wager money on the games they play.
Unlike DraftKings, Skillz is not a regulated gambling company. Skillz is simply a platform where users can participate in eSports and players can win significant cash prizes.
With more people staying home during the early stages of the pandemic, Skillz saw a significant increase among users. The company’s revenue grew by 92% in 2020 and 67% in 2021.
The company’s revenue increases helped to drive higher SKLZ share price. The share price of SKLZ quickly rose from its IPO level by over 300%, hitting a share price of $43 per share in February 2021.
Unfortunately for shareholders, the stock price of SKLZ has fallen drastically over the last year. As of March 2022, SKLZ has a market cap of $8.3 million and is trading around just $3 per share. That puts Skillz in the category of a penny stock – which is technically defined as a company trading at a price under $5 per share.
It’s a mighty fall, but the forecasts for growth of $734 million in top line revenue by 2026 suggest Skillz could reclaim former glories, and significantly higher share prices.
FuboTV
An alternative to cable TV, streaming service FuboTV saw a significant increase in membership volume throughout 2020 and 2021.
Founded in 2015, FuboTV is an American streaming service that offers live sports coverage to customers in the United States, Canada, and Spain.
Like many other digital entertainment companies, FuboTV achieved massive revenue increases throughout the pandemic during which time the company tripled its revenues to $631 million.
Like DKNG and SKLZ, FUBO stock did not go public until 2020. FUBO’s initial public offering was in October 2020 at which time its stock was trading around $10 per share.
The share price of FUBO quickly rose after its IPO, reaching a price of $44 per share by December 2020. Prices rose further to hit an all-time high of $48 per share in February 2021.
However, FUBO has experienced a massive sell off since. As or March 2022, FUBO has a market cap of $1.1 billion and is trading at just $7 per share. Still, sales are expected to rise by 250% over the next 5 years to hit $3.5 billion which would likely catalyze a resurgence in share price.
Why Are These Stocks Being Sold Off?
Overall, there are many common themes between the DraftKings, Skillz, and FuboTV stocks. While these companies are fast growing with even faster growing revenue streams, they lack overall profitability.
Both DraftKings and Skillz invest aggressively in sales and marketing. While this helps to grow their top line sales, it also cuts into their total profits. Similarly, FuboTV is unprofitable. This is attributable to management’s decision to sell streaming packages at prices too low to recoup the costs of production and marketing.
All of the companies are looking to acquire customers in droves short-term in the hopes of generating recurring revenues later that will drive profitability down the line.
The economy is still facing uncertain times ahead which is causing investors to sell off riskier stocks like DraftKings, Skillz, and FuboTV. If the companies can achieve their revenue forecasts and turn profitable, expect a similar spike in share price as to that seen in Amazon or Tesla, when both of those companies turned the profitability corner.
Wall Street rewards fast growing companies that produce positive bottom lines and lots of free cash flow. Expect them to do so again when these 3 sold off stocks with massive growth turn profitable too.
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