Can Zynga ETFs Shine on Q2 Results Amid Rising Online Gaming?
Zynga Inc. ZNGA, which reported second-quarter 2020 earnings results on Aug 5, has witnessed a widening of loss year over year. Meanwhile, revenues managed to improve from the year-ago period. Notably, the company’s shares have lost 3.4% since the earnings release.
Q2 Earnings at a Glance
The company reported second-quarter 2020 loss of 16 cents per share, wider than the loss of 6 cents reported in the year-ago period. Meanwhile, revenues rose 56.9% year over year to $452 million, on support from live services and robust growth in global markets. The Zacks Consensus Estimate for earnings and revenues was pegged at 8 cents per share and $503 million, respectively.
Total bookings were $543 million, up 54.7% year over year in the quarter under review. Solid mobile bookings provided support to the upside. The consensus mark for bookings was pegged at $503 million.
Commenting on the results, Frank Gibeau, CEO of Zynga, said “we delivered tremendous results in Q2, achieving our highest quarterly revenue and bookings and generating Zynga’s best quarterly operating cash flow in more than eight years. We also executed our transformational acquisition of Peak and are now entering Q3 with eight forever franchises, adding significant scale to our live services foundation.”
Coronavirus Drives Online Gaming Demand
People are increasingly resorting to online games in the United States amid quarantine. Moreover, coronavirus has resulted in drastic changes in lifestyle and preferences of people. Even with some states reopening and easing social-distancing norms, people have been trying to minimize human-to-human contact.
Zynga’s online game revenues (85.9% of total revenues) rose 61.3% year over year to $388.2 million on support from its five popular franchises — CSR Racing, Words With Friends, Zynga Poker, Empires & Puzzles and Merge Dragons! along with strong player engagements across titles as a result of pandemic-driven self-quarantine by users globally.
Mobile revenues (95.9% of total revenue) and mobile bookings rose 50.9% and 39.1%, respectively, year over year to $433 million and $498 million. The upside was driven by robust live services performance. In the quarter under review, user pay revenues were $388 million, up 61% year over year. User pay bookings were $455 million, up 47% year over year. Zynga’s average mobile daily active users rose 4% year over year to 22 million.
Guidance
For third-quarter 2020, Zynga projects revenues of $445 million and bookings of $620 million. Management expects the top line to get support from mobile live services, with expected sequential growth across its five forever franchises, including full-quarter contributions from Toon Blast, Toy Blast and Merge Magic! Going on, for 2020, management expects revenues of $1.8 billion and bookings of $2.2 billion.
ETFs to Ride the Tide
Against this backdrop, investors can take a look at the following ETFs:
VanEck Vectors Video Gaming and eSports ETF ESPO
The fund seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the MVIS Global Video Gaming and eSports Index, which is intended to track the overall performance of companies involved in video game development, esports, and related hardware and software. It holds 25 stocks in its basket. The fund allocates 4.4% weight to Zynga. With AUM of $420.6 million, the fund charges 55 basis points in expense ratio. The fund has lost around 1.5% since Zynga’s earnings release (read: 3 Thematic ETFs to Rule in Pandemic-Stricken Q3).
Global X Video Games & Esports ETF HERO
The fund seeks to invest in companies that develop or publish video games, facilitate the streaming and distribution of video gaming or esports content, own and operate within competitive esports leagues, or produce hardware used in video games and esports, including augmented and virtual reality. It holds 40 stocks in its basket. Zynga holds 4.2% weight in the fund. With AUM of $216.5 million, the fund charges 50 basis points in expense ratio. The fund has lost nearly 0.5% since Zynga’s earnings release (read: Hot ETFs to Tap Consumers' Digital Shift Amid Coronavirus).
Global X Social Media ETF SOCL
The fund provides investors access to Social Media companies around the world. It holds 40 stocks in its basket. Zynga holds 2.5% weight in the fund. With AUM of $189.2 million, the fund charges 65 basis points in expense ratio. The fund has lost nearly 1% since Zynga’s earnings release (read: Facebook Q2 Earnings Beat Estimates: ETFs Set to Soar).
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Global X Video Games Esports ETF (HERO): ETF Research Reports
Zynga Inc. (ZNGA) : Free Stock Analysis Report
Global X Social Media ETF (SOCL): ETF Research Reports
VanEck Vectors Video Gaming and eSports ETF (ESPO): ETF Research Reports
To read this article on Zacks.com click here.
Zacks Investment Research
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
