Zynga Joins List of Gaming Companies Benefiting from Stay-at-Home

Zynga experienced its best first quarter ever for revenue and bookings as stay-at-home orders sparked more demand for its mobile games.

Higher engagement: The average Zynga customer has an extra 10 hours per week of free time on his or her hands due to quarantine, and users are devoting at least 1 of those hours to playing mobile games, according to Wedbush Securities analyst Michael Pachter. Pachter, who raised his price target on the stock to $9.25 from $9 and has an ‘Overweight’ rating, assumes that the average mobile gamer who played 5 hours per week before the pandemic will now play 6 hours per week, resulting in a 20% bump in spending by gamers. Since quarantine began in late March, the full effect of Covid-19 and Zynga’s engagement was not fully realized in Q1, but  Zynga’s management noted on the earnings call that the company expects strong DAU growth in Q2. 

But, lower ad revenue: One vulnerable spot in Zynga’s business is its ad business as marketers pull back spending in light of Covid-19. Q1 advertising bookings fell 4% year-over-year, and Wedbush anticipates a 20% drop moving forward. UBS, which has a ‘Buy’ rating and $8.30 PT, is less pessimistic about the drop in advertising. The firm estimates ad bookings to rise to $66 million in Q2, up from $64 million a year earlier. Ad bookings accounted for about 13.6% of total bookings in Q1. 

Bottom line: The quarantine is putting Zynga in a position to attract more gamers and to build a bigger audience for its upcoming slate of games, which includes FarmVille 3. The longer employers keep their workforces at home, the more free time people will have to spend playing mobile games.