Why Zynga Stock Jumped 16.5% in February

The free-to-play game leader ended 2018 on a high note and expects accelerated growth in the coming year.

Steve Symington
Steve Symington
Mar 8, 2019 at 1:20PM
Technology and Telecom

What happened

Shares of Zynga (NASDAQ:ZNGA) climbed 16.5% in February, according to data from S&P Global Market Intelligence, after the mobile gaming specialist announced solid fourth-quarter 2018 results and encouraging forward guidance.

Zynga climbed 8% in the two days following its quarterly release on Feb. 6, 2019, then continued to drift higher for the duration of the month.

Several teenagers using their smartphones

IMAGE SOURCE: GETTY IMAGES.

So what

That's not to say Zynga's fourth quarter looked impressive at first glance. Revenue grew a modest 7% year over year to $249 million, translating to net income of $559,000, or roughly breakeven on a per-share basis.

That said, Zynga didn't provide specific bottom-line guidance three months earlier. But its revenue last quarter exceeded its outlook by $6 million. Bookings also climbed a strong 19% year over year to $267 million, exceeding guidance by $7 million. Zynga's results were particularly strong on the mobile side, with mobile advertising revenue and bookings climbing 23% and 20%, respectively -- a feat management credited to a combination of higher player engagement in the company's popular Words With Friends, Merge Dragons!, and CSR2 games, as well as ad network improvements and the addition of its new Casual Cards and Gram Games titles.

Check out the latest earnings call transcript for Zynga.

Now what

"Zynga's turnaround is now complete and we are well positioned for significant growth in 2019 and beyond," stated CEO Frank Gibeau in the company's letter to shareholders.

More specifically, Zynga now expects 2019 revenue to increase 27% year over year to $1.15 billion, while bookings should soar 39% to $1.35 billion. The company believes its strength will stem from both its live service portfolio, and its five so-called "forever franchises," including Words With Friends, Empires & Puzzles, Zynga Poker, Merge Dragons!, and CSR Racing.

In the end, coupling Zynga's relative outperformance in the fourth quarter with its impending acceleration in growth this year gave the market more than enough reason to bid up the stock last month.