Zynga Shares Soar 11 Percent as New Jersey Moves Closer to Online Gambling
Zynga’s stock is seeing its first big leap in more than six months, fueled by a decent fourth-quarter report and evidence that online gambling is starting to make progress in the U.S.
On Tuesday, Zynga appeased investors by beating its already lowered expectations for the period and exceeding analysts’ expectations.
It also showed critical progress on mobile, where one-quarter of the company’s monthly active users are now playing its games — that’s 72 million people out of 298 million monthly average users in total, making for a very large market across both Facebook and smartphones.
Just yesterday, there was some additional good news for the struggling games company.
New Jersey Governor Chris Christie gave conditional support to in-state Internet gambling, a market that will benefit Zynga as it looks for potential new revenue sources.
To date, most of Zynga’s real-money gaming efforts have been focused in the U.K., where online gambling has been legal for a while. Zynga confirmed on Tuesday that it still plans to launch games there during the first half of the year. Additionally, it said its real-money games would also be available on Facebook in the U.K., where the social network has only conducted a few minor tests to date.
Zynga’s stock soared 11 percent today, or 34 cents, to $3.43 a share. The stock has not traded that high — at least consistently — since July. While today’s rise is encouraging, shares are still down more than 75 percent from a high of $15.91.
Other gambling stocks also jumped following the news out of New Jersey, including Caesars Entertainment, which saw its shares rise 38 percent, or $3.84 a share, to close at $13.91.
What’s particularly important to note about the measure that Christie has endorsed is that it would permit a kind of reciprocity with other states where online gambling is legal. Zynga has already begun the long process of getting licenses in Nevada, so conceivably it would not have to jump through as many hoops to begin operating in New Jersey. And reciprocity would be essential to making a big enough market.
While many investors are obviously thrilled about the prospects of online gambling, it’s hard to know how much revenue it will produce. Dennis Farrell, a gambling-industry analyst for Wells Fargo, told The Wall Street Journal that online gambling could generate between $650 million and $850 million in annual revenue for the industry in the near term, assuming around 5.8 million people gamble on the sites.