Zynga (ZNGA) is benefiting from strength in live services, product launches, and expansion in international markets. The robust performances of popular franchises are driving the company’s top line.
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The company recently released its Q3 results, which saw a 40% surge in revenues. An uplifted outlook for full-year 2021 was also a positive. (See Analysts’ Top Stocks on TipRanks)
Riding the Mobile Gaming Wave
The company’s mobile gaming portfolio is gaining momentum and is expected to be a key growth booster very soon. User response for games such as Farmville 3, Merge Magic!, Puzzle Combat, Toon Blast, and Toy Blast have taken the company to better heights. Notably, 80.8% of total revenues in 2020 came from mobile gaming.
In Q3, Zynga’s average mobile daily active users climbed 21% year-over-year to 38 million. Furthermore, average mobile monthly active users surged 120% year-over-year to 183 million in Q3 of 2021.
Zynga became an 80% stakeholder of Rollic in October 2020, thereby penetrating the multi-billion-dollar hyper-casual gaming market. Rollic’s portfolio of hyper-casual games (easy-to-play and free-to-play online games) also witnessed solid user uptake in Q3.
Website Traffic Dissonance
When looking at the online volume data for zynga.com, a divergence can be identified. From Q2 to Q3, ZNGA had a rough time. Total visits to its website dropped 48.68%, while the share price fell 29.16%. However, when comparing the year-to-date periods of 2020 and 2021, total visits increased 78.25%.
This shows that while Zynga has suffered in the short-term, the company is still drawing more to its website than it was during the throws of the pandemic.
Wall Street’s Take
Following the Q3 results, Oppenheimer analyst Martin Yang reiterated a Buy rating on Zynga, with a $13 price target. He was encouraged by the company’s “robust pipeline, expansion plans, and integrations of recent acquisitions,” which he expects will help maintain growth going into FY22.
Wall Street analyst consensus also has an optimistic stance towards Zynga, with a Strong Buy rating based on 11 unanimous Buys. The average Zynga price target of $10.86 indicates an upside potential of 45.6%.
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Disclosure: At the time of publication, Chandrima Sanyal did not have a position in any of the securities mentioned in this article.
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