It’s been a bumpy few months for gaming stocks as a volatile market and worries about the future of the industry weighed on sentiment. However mobile-game maker Zynga (NASDAQ:ZNGA) has largely bucked that trend, rising 13% over the past 6 months. The firm can attribute its success to a string of acquisitions as well as strong growth within the mobile gaming sector. With the company due to report its fourth-quarter results after the bell on Wednesday, here’s a look at what’s ahead for Zynga stock.

Impressive Earnings

Most are expecting ZNGA stock to deliver when it comes to Q4 results. The firm is seen posting EPS of $0.04 on revenue of $260.31 million — a 16.3% rise from the year-ago quarter. Just meeting those expectations would represent commendable growth for Zynga stock, but many believe the firm may even exceed those predictions with a positive earnings surprise. 

Several analysts have jumped on board the Zynga train with KeyBanc Capital Markets upgrading ZNGA stock to Overweight and Goldman Sachs initiating coverage with a Buy rating. Both analysts cited potential growth in the mobile gaming sector as reason for their optimism. Goldman Sachs’ price target of $5.30 for Zynga stock represents a 15% upside from where the stock is trading today while KeyBanc painted an even rosier picture with a price target of $5.50 — an 18% increase from ZNGA stock price  today.

Small Giant Merge

Another aspect of today’s earnings call that investors should watch for is news about Zynga’s acquisition of Small Giant Games. Back in December the company announced plans to buy 80% the Helsinki-based firm for $560 million. ZNGA is planning to buy the remaining 20% of the firm over the course of 3 years. 

This acquisition is important to Zynga’s growth story for a few reasons. First, Small Giant’s games could become major growth drivers for ZNGA, especially internationally. The firm’s Empires & Puzzles game has been in a top performer in both the Google Play Store as well as Apple’s App Store. 

The impact of bringing Small Giant under the Zynga umbrella likely won’t materialize until the back half of 2019, but investors should be looking for the firm to comment on how it will use Small Giant to fuel stronger international growth moving forward.

Recent Rally in ZNGA

Based on analysts’ predictions, Zynga’s quarterly results look likely to impress. However, the question will be whether they can impress enough to sent the stock higher. While Zynga stock does appear to have a solid long-term growth story, it’s worth noting that the firm’s share price has gained 20% in just 2 months. 

Some would argue that ZNGA’s most recent rally has already priced in any optimism that the Q4 results might have to offer. Plus there’s a chance that Zynga isn’t able to meet expectations, which could be catastrophic for a company that’s had so much buildup ahead of a quarterly report. 

Social Media 

Investors should also be looking for management to address worries that social media grabbing market share away from mobile gaming. As Luke Lango put it:

“In the big picture, it seems like social-media platforms are becoming more multi-purpose than ever before, and in so doing, are taking share away from mobile-gaming platforms. If that trend continues, Zynga’s future isn’t so bright.”

That’s a valid concern when you consider that one of the major reasons analysts are bullish on ZNGA stock is the fact that mobile looks like a growing industry. Growth in mobile-gaming specifically, though, is questionable. Some say mobile gaming in the U.S. has already reached its peak, and therefore Zynga would have to compete with the likes of Tencent (OTCMKTS:TCEHY) in China for a piece of that pie. Plus, social media firms are working to build out their services to create all-encompassing platforms that allow everything from e-commerce to — you guessed it — gaming. 

The Bottom Line for Zynga Stock

Overall, I’d say Zynga stock’s long-term future looks bright. The company appears to be well positioned to capitalize on growth in the mobile gaming market both in the U.S. and abroad. However, the firm’s most recent rally could put a damper on its Q4 results, especially if they’re not at least in line with analysts’ expectations. 

As of this writing, Laura Hoy did not hold a position in any of the aforementioned securities.