Zynga’s Stock Just Doubled. 4 Reasons Why It Can Double Again
Zynga Inc. is a provider of social game services and the stock has almost doubled since the March 2020 low and is showing no signs of slowing down. The company recently reported its second quarter June 2020 earnings and some investors are making the case that it could easily double again.
Highlights From Q2 Earnings:
Zynga Inc reported 2nd Quarter June 2020 earnings loss of $0.16 per share on revenue of $451.7 million. Based on IR Insight, the consensus earnings estimate prior to the print on August 5th, was for a loss of $0.16 per share on revenue of $428.1 million. It is important to note that revenue grew by a very impressive +47.4% on a year-over-year basis.
The company is bullish on its future and so are the shareholders. Zynga said it expects third quarter bookings of $620.0 million and now expects 2020 bookings of $2.20 billion! If that happens that will signal tremendous growth and the stock could easily double again in that scenario. Especially, when you look at the company’s previous guidance $1.84 billion for 2020 bookings.
The current consensus estimate is bookings revenue of $625.8 million for the quarter ending September 30, 2020 and bookings revenue of $2.218 billion for the year ending December 31, 2020. In fact, Q2 2020 was the highest revenue and bookings performances in Zynga’s history and the fact that it expects more growth is bullish for the stock.
4 Growth Drivers:
Zynga’s live services portfolio and slate of forever franchises drove this growth and the company expects it to continue. Titles including Empires & Puzzles, Merge Dragons! and Words With Friends are firing on all cylinders and continue to deliver record-breaking quarters.
Another important driver of growth comes from Zynga’s recent acquisition of Peak which expands their live services portfolio. Zynga now has several chart-topping titles that will only grow even after Covid passes. Some of these titles are: Forever Franchises, Toon Blast and Toy Blast, just to name a few. The contribution of Peak helped increase Zynga’s full year outlook as the company raised its full year 2020 guidance. The company continues to expect the vast majority of 2020 performance to be driven by live services.
Zynga also announced its intention to acquire Rollic, one of the fastest growing hyper-casual developers and publishers worldwide in 2020. Eight of Rollic’s games have reached #1 or #2 top free downloaded games in the U.S. App Store, and their latest releases, Go Knots 3D and Tangle Master 3D, were the top two most downloaded games in the U.S. App Store in Q2 2020. With this acquisition, Zynga enters the hyper-casual market – one of the largest and fastest growing gaming categories on mobile, while increasing their audience, and expanding and diversifying their advertising business.
The fourth area of growth comes from R&D. The company is constantly innovating and working on introducing new games later this year and beyond. The company has a strong track record in R&D, it has already developed several very successful titles, and a range of social games, including games in its Slots, Words With Friends, Zynga Poker and FarmVille franchises. It operates its games as live services and updates them with new features. It analyzes the data generated by its players’ game play and social interactions to guide the creation of new content and features. The Company operates its games as live services that are available anytime and anywhere. The Company invests in game categories, including Social Casino, Casual, Action Strategy and Invest Express. Social Casino includes Zynga Poker and its Slots games, such as Hit It Rich! Slots, Wizard of Oz Slots, Willy Wonka and the Chocolate Factory Slots, and Black Diamond Casino, just to name a few.
Zynga is in the entertainment business and people all over the world have an innate desire to be entertained. People pay to be entertained in just about any economic environment. For the reasons mentioned above, many investors believe that Zynga can easily double a few more times over the next several years.