Lockdowns and stay-at-home orders didn’t help every business. However, it did introduce many people to the joys and addictions of gaming. Zynga (NASDAQ:ZNGA) was poised to benefit from this, and ZNGA stockholders have already enjoyed rapid price appreciation.
The question now, then, is whether the momentum can continue. After all, lockdowns are already in the process of being lifted in some areas. And value-focused investors might wonder whether it makes sense to own ZNGA stock at the current price point.
But the price can be justified by Zynga’s strong revenues as well as a partnership with Snap (NYSE:SNAP) which could be, well, game-changing. All things considered, you might find that ZNGA stock is a bargain compared to where it’s likely headed.
A Closer Look at ZNGA Stock
The gains came fast and furiously for ZNGA shareholders despite the spread of the novel coronavirus in February and March. A quick couple of weeks of volatility were followed by a stairway to heaven as cooler heads prevailed and patient investors easily recouped their short-term losses and then some.
Traders with good timing were able to generate quick 50% gains as the ZNGA stock price ran from $6 in March to $9 in late May. This was a time when people in multiple regions of the world were turning to video games as a means of recreation. Clearly the momentum is to the upside for ZNGA shares as the buyers have practically sent the short-sellers
into exile, at least for the time being.
Snapping Into Action
Snap has a massive presence in the social-media domain because of the ubiquitous Snapchat app. So, a recently expanded partnership with Snap is surely a boon to a growing video-game provider like Zynga.
Reportedly, Zynga will create more multiplayer games exclusively for Snap Games, which is Snap’s gaming platform. The first of the games in this expanded collaboration, Bumped Out, is already available.
It’s not the first time that Zynga has produced video games for Snapchat. The company created multiplayer shooter Tiny Royale for the Snap Games platform back in June of 2019.
Getting more games into Snapchat users’ hands will raise Zynga’s profile and introduce the video-game maker’s offerings to potentially many thousands of gamers. Best of all, Snap Games isn’t just for hard-core gamers, so even novices will now be able to enjoy more of Zynga’s games while cooped up indoors.
Zynga President of Publishing Bernard Kim eagerly elaborated on the value-added synergy to result from this expanded collaboration:
“Snap Games is such a unique and exciting platform where players can jump right into highly-social, snackable experiences… We’re thrilled to develop a slew of new titles for the Snapchat community, starting with Bumped Out, and to have the opportunity to innovate new social game mechanics, helping to build out the Snap Games ecosystem.”
Winning the stock-market-investing game means owning stakes in companies that generate strong revenues. Zynga’s first-quarter earnings results are proof positive that the company financials are on an upward trajectory.
Read ’em and weep: $404 million in quarterly revenues indicate a 52% year-over-year increase. At the same time, quarterly bookings of $425 million signify a year-over-year increase of 18%.
Guidance for the second quarter suggests revenues of $400 million as well as bookings of $460 million. Thus, the company is justifiably confident that the gaming craze will persist even as the world eases its stay-at-home restrictions.
The Bottom Line
So, how can you effectively game the system in a highly challenging stock market? Stick with companies that are on solid financial ground and can continue to generate strong revenues. And with the gaming craze likely to persist, ZNGA stock undeniably falls into that category.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets. As of this writing, he did not hold a position in any of the aforementioned securities.