Has Zynga Inc (NASDAQ:ZNGA) lost its zing?

Posted by Kristi Scott August 29, 2013 0 Comment 5170 views


From an investment viewpoint, today, it seems like Zynga Inc (NASDAQ:ZNGA) is more of a speculative stock rather than a good position that in investor can maintain. This was the very same thought that reverberated on the street when the company decided that it was going to shutter OMGPOP.

Even before that ZNGA had reversed on its decision to expand into the online real-gaming space in the U.S. Investors started losing interest when the company scrapped this plan and most moved into skeptical-mode. This was due to the fact that if the online real gaming plan had been seen through to fruition it would have been a definite money-churner for the companies and profited the investors.

Challenging times

Since then, the company has had a tough time with maintaining its profitability run. This is unfortunate because it had a large number of games that were runaway hits on a global level. It is extremely difficult to rake in revenue in the gaming business because a majority of the online players play the free version. No doubt, Zynga performed well for a span of time and had managed to generate $150-175M /quarter in revenue. However the bone of contention is the company’s profits.

The bullish trend

The Wedbush Securities’ analyst Michael Pachter is one of the people who are bullish on Zynga stock. He has assigned an “outperform’ rating on the stock and says that the chances of a takeover are very slim unless there is a significant rise in the stock price. His theory is based on the assumption that Don Mattrick, the new CEO who joined ZNGA from MSFT in July, will be able to plan and execute a successful turnaround strategy. Downsizing of jobs has already been announced. The aim is to pull costs down even further even as expansion to other platforms continues.

From a current viewpoint, Zynga doesn’t really look the most stable stock to invest in. But just maybe if all the measures that the new CEO is implementation bear fruition, things might start looking up for the company.


About Kristi Scott

Kristi Scott joined GDP Insider in 2005 as a Wall Street reporter for the Business and Market section. Kristi covers the stock market, financial markets and personal finance. Her awards have come from the National Federation of Professional Writers, the Ohio Newspaper Association, the Cleveland Press Club, the Society of Professional Journalists and Suburban Newspapers of America. Kristi was named SNA's national Journalist of the Year

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