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Zynga Stock Has Been Soaring in 2020, No End in Sight

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Lately, Zynga (NASDAQ:ZNGA) stock has been in hot demand. At $9.66 per share, the stock has gained 58% this year.

Zynga benefited from the coronavirus pandemic. The outbreak limited people’s outdoor activities. As a result, people turned to videogames. They stayed at home to avoid contracting or spreading COVID-19. Overall, the lockdown boosted the demand for Zynga’s game products. The company reported record first-quarter revenue, which sent Zynga stock soaring.

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Notably, Amazon (NASDAQ:AMZN) and Netflix (NASDAQ:NFLX) are the other technology stocks that have soared amid the pandemic. At $2,471 per share, Amazon stock has gained about 35% this year. Amazon shares have risen due to the pandemic-driven spike in demand for online shopping, which increased Amazon’s retail sales. Meanwhile, Netflix added a record 16 million subscribers in the first quarter. The pandemic boosted the uptake of online video streaming.

Peak acquisition could boost Zynga stock

Zynga stock has risen more than 20% since the company reported its first-quarter results on May 6. The company delivered record first-quarter revenue of $404 million and rose 52% year-over-year.

Zynga stock has mainly risen amid the pandemic. The Peak Games acquisition could make the stock more attractive. Zynga entered a deal to purchase Peak Games for $1.8 billion. The company needs the acquisition to enlarge its games portfolio, expand its international audience, and boost its profit margins. Founded in 2010, Peak is the name behind hit titles Toon Blast and Toy Blast. Peak’s entire team of 100 people will move over to Zynga.

Zynga lifts its revenue outlook

Zynga’s business benefited from pandemic-driven demand in the first quarter. The company expects the pandemic gains to continue. Also, Zynga raised its revenue outlook for the second quarter to $430 million from $400 million originally. Now, the company expects its fiscal 2020 revenue to be $1.69 billion from $1.65 billion originally. Notably, Zynga’s new revenue outlook doesn’t include the contribution from the Peak acquisition. The company expects to close the transaction in the third quarter if it receives all of the regulatory approvals the deal requires. The Peak acquisition will cost $900 million in cash and $900 million in Zynga stock for a total of $1.8 billion.

At this point, Zynga stock breached Wall Street’s average target price of $7.96. However, the stock has more than 20% upside to its highest Wall Street target price at $11.50.

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