Why Zynga Stock Gained 55.6% in 2017

MarketsMotley Fool

What happened

Shares of Zynga (NASDAQ: ZNGA) soared 55.6% in 2017, according to data from S&P Global Market Intelligence. Strong performances from some of the company's key franchises and earnings momentum spurred by successful cost-cutting measures helped the stock to have its best showing in years.

Continue Reading Below

So what

Zynga's share price hit a three-year high in 2017 as signs of a successful turnaround effort began to mount and were accompanied by new favorable ratings coverage. In previous years, the company had difficulty finding its footing in the mobile games space and struggled to introduce new properties, but it seems to be getting back on track by concentrating on getting the most out of its existing catalog.

Content updates helped propel Zynga Poker, CSR Racing 2, and the company's assortment of slots-based games to strong sales growth in 2017, and these properties appear to present a viable path to cost-effective sales growth over the next year.

Now what

Zynga's comeback strategy hinges on delivering regular updates for its key titles in order to keep players engaged and spending on in-game items. Developing new content for existing games is typically much less expensive than creating entirely new titles, so it can be a much more profitable use of resources so long as a healthy player base is maintained. Thanks to strong continued engagement for franchises like Zynga Poker and CSR Racing, Zynga is looking at a return to regular profitability in the near term, but the company will also need to prove that it can deliver new hit franchises in order to shore up its long-term prospects.

10 stocks we like better than ZyngaWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Zynga wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of January 2, 2018

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Continue Reading Below