The coronavirus pandemic is showing some signs of winding down, but the crisis is far from over. Many experts are now predicting a devastating second wave of COVID-19 that could be even deadlier than the first wave. That means the lockdowns and economic disruption could potentially come back.
In uncertain times like this, investors can protect their portfolios by investing in tech companies with business models that can thrive in the age of social distancing. The mobile gaming industry fits the bill. That's why Zynga (ZNGA), Activision Blizzard (ATVI 0.35%), and Glu Mobile (GLUU) are set to deliver coronavirus-resistant returns amid this pandemic.
Let's take a closer look at these three coronavirus-proof tech stocks and what makes them worthy of consideration for your investment portfolio.
Zynga designs and develops video game software -- specifically for mobile devices like smartphones and tablets. With the COVID-19 pandemic shutting down movie theaters, nightclubs, and other forms of interactive entertainment, mobile gaming will get a boost as people look for safer ways to keep themselves entertained. Zynga shares have surged more than 34% year to date compared to an 8% decline in the S&P 500. And the stock looks set to continue outperforming the market because of its rapid top-line growth and strong balance sheet.
Zynga reported first-quarter earnings on May 7, and the results show that the business has held up well so far in the coronavirus pandemic. Total revenue soared 52% from $265.40 billion to $403.77 billion. This revenue growth was powered by the company's rapidly expanding online gaming segment, which grew 72%, from $200.16 billion to $344.36 billion. Zynga has cash and short-term investments worth $1.26 billion on its balance sheet, which leaves it well-positioned to make synergistic acquisitions to drive top-line growth in the future.
Like many growth companies, Zynga struggles with weak margins, and that means management will need to push for profitability over the long term -- perhaps through highly synergistic acquisitions that can boost sales while keeping operating costs in check. The company generated a net loss of $103.93 million in the first quarter compared to a $128.83 million loss in the prior-year period.
2. Activision Blizzard
Activision Blizzard is riding high amid the coronavirus pandemic, with shares up about 23.4% year to date compared to an 8% decline in the S&P 500. Investors are optimistic about the company's new free-to-play battle royale game, Call of Duty: Warzone, which has already brought in over 60 million players since its launch in March. The company also launched Call of Duty Mobile and Modern Warfare in the fourth quarter of fiscal 2019.
Call of Duty: Warzone has a different business model than other titles in the Call of Duty Franchise. Inspired by the success of blockbuster free-to-play titles like League of Legends and Fortnite -- which are both owned by Tencent Holdings (TCEHY -1.52%) -- Activision Blizzard has made Warzone free to download with hopes to monetize the game through optional customizations and downloadable content.
Free-to-play is a proven business model that saw Tencent's League of Legends take in $1.5 billion in revenue in 2019. And while it is unclear how much revenue Warzone will generate, the game is off to a good start because of its rapidly expanding user base.
Activision's management is projecting net revenues to come in at $6.8 billion in the full year of 2020, which would represent a 4.78% increase from the $6.49 billion generated in 2019. The company is also guiding for EPS to come in at $2.22 in the full year of 2020, which would be a 13.85% increase from the prior-year period's EPS of $1.95 and give the company a 16.7% payout ratio on its 2019 dividend.
3. Glu Mobile
Mobile gaming has seen a surge in popularity because of coronavirus-related lockdowns around the globe. And this is a massive tailwind for Glu Mobile, the owner of intellectual properties like MLB Tap Sports, Covet Fashion, and Kim Kardashian: Hollywood. The company operates a lucrative "freemium" business model where mobile games are provided free of charge, but gamers have to pay for additional features and expanded functionality.
Glu Mobile is performing well during the coronavirus pandemic, with shares soaring nearly 59% compared to an 8% decline in the S&P 500. The company also reported solid first-quarter earnings, with revenue growing 12% year over year from $95.6 million to $107.3 million.
Glu's top-performing intellectual properties are Kim Kardashian Hollywood, which saw bookings grow 25.3% from $8.3 million to $10.4 million, and Tap Sports Baseball, which saw bookings grow 25.3% from $13.4 million to $16.2 million. The company also released a new game, Disney Sorcerer's Arena, and extended its partnership for Kim Kardashian Hollywood for an additional three and a half years.
These new titles will benefit from the global surge in mobile gaming activity and help Glu Mobile maintain its healthy growth rate and beat the market during the coronavirus pandemic.