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Why Zynga Stock Rose 2.1% in March

By Keith Noonan – Apr 7, 2020 at 3:16PM

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Video-game engagement increased last month, as people self-isolated in response to the coronavirus.

What happened

Shares of Zynga (ZNGA) climbed roughly 2.1% in March, according to data from S&P Global Market Intelligence. The mobile-gaming company's stock held up well in a month of trading that was defined by concerns about the novel coronavirus, and it significantly outperformed the S&P 500 index.

^SPX Chart

^SPX data by YCharts.

With people staying inside and self-isolating to stem the spread of the novel coronavirus, many video games saw increased player engagement -- and many gaming stocks proved relatively resilient in last month's tumultuous trading. Zynga may also have benefited from the new video game it announced at the beginning of the month, set in J.K. Rowling's Wizarding World franchise.

Hands using a mobile phone

Image source: Getty Images.

So what

Zynga published a press release on March 5 announcing its upcoming game, Harry Potter: Puzzles & Spells. The game will be set in the match-three puzzle genre, and be available on Android, Apple iOS, Facebook, and Amazon Kindle platforms.

While the announcement of Harry Potter: Puzzles & Spells may have helped Zynga's stock last month, heightened player activity and general resilience for video game stocks were probably bigger factors in the company's performance. Verizon CEO Hans Vestberg stated that his company's network had seen a 75% increase in gaming traffic since the start of the novel coronavirus outbreak, and investors seem to have liked Zynga's odds of soaking up extra player engagement.

Now what

Zynga stock has slipped early in April's trading, despite positive momentum for the broader market. The video game company's share price is down roughly 5% in the month so far:

^SPX Chart

^SPX data by YCharts.

Zynga's first-quarter earnings period closed at the end of March, and the company will likely report its first-quarter earnings results some time next month. While some companies have either cut or fallen short of guidance due to the novel coronavirus, the digital nature of Zynga's business suggests that it stands a good chance of hitting its sales target. In February, the company issued guidance for first-quarter revenue to increase 45% year over year, reaching $385 million.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Keith Noonan has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon, Apple, Facebook, and Zynga. The Motley Fool recommends Verizon Communications and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool has a disclosure policy.

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