Tomahawk, WI 04/14/2014 (Basicsmedia) – The zing may have gone somewhat from Zynga Inc (NASDAQ:ZNGA) but the stock is still likely a good investment for those with time horizons of one year and above.
The Zynga stock has fallen some 28% in the past one month. Clearly, some of that has to do with the IPO of King Digital Entertainment PLC (NYSE:KING), the maker of the Candy Crush game. Even King Digital stock has been down since its IPO.
While it has over $1 billion in cash, its 4Q2013 revenue declined by 43% YoY to $176 million and also declined in comparison to 3Q2013 by 13%. Zynga’s Daily Active Users (DAUs) and Monthly Active Users (MAUs) are declining, down by 51% and 62% respectively YoY.
But revenues are expected to rise this year and also in 2015 according to the current consensus. The company might even show a small profit in 2014. Considering that the stock sold at over $14 in early 2012, Zynga could be a good speculative play for investors with a strong heart.
No wonder hedge fund billionaire Steve Cohen led SAC Capital has increased its shareholding in Zynga to 5.1%. The negative performance of King Digital after its IPO should not necessarily reflect on Zynga. Zynga has mobile ready versions of its popular games lined up for release including FarmVille 2: New Words With Friends, Country Escape and New Zynga Poker.
The company has announced the appointment of David Lee as the new Chief Financial Officer and Chief Accounting Officer.
Audience taste can change in an unpredictable fashion. While FarmVille and CityVille were once wildly popular, now the public is busy playing Candy Crush. Nobody can predict what the next big hit game idea will be, whether it will be a game based on the Game of Thrones TV show or a game about trying to land a spaceship on Titan or explore its seas.
It is up to the game designers at Zynga to stay ahead of the curve of the audience’s taste or predict what Facebook games will hook Facebook users next year. Admittedly, that is one tough job.