If I had to venture a guess on a sale of the company, and this is only a gut felling knowing the reputation and history of Mark Pincus. I think us shareholders get maybe 3 bucks/shr. a few key management people make out well and Pincus gets a golden parachute that makes Mattricks salary and severance package look small. That seems to have Pincus fingerprints all over it to me.
Getting close to $2.38. The trading on this is so pathetic that it won't take much to knock it down. CC in a few days but most would rather buy low than at moderate levels because of lack of trust. Thus the lower PPS.
The pps is up? What stock are you following? The pps is near it's 52 week low and the pps was $3.05 less than a month ago. The pps is up?
The current Zynga strategy is to "swing for the fences". They need a hit and cutting R&D isn't going to get them there. Of course spending a lot doesn't guarantee a hit. Heck The Harvest Swap game is almost grossing what Empires and Allies is. I like the current strategy, but it is easy to see that if they restructure for profitability rather than just the hope of growth there is an immediate gain in value in the short term.
Let's say someone buys them, reduces R&D by 50%(which would still give them one of the biggest R&D budgets in the industry), cuts COGS 20%, Sales and Marketing 30% and G&A 40%. It certainly would leave the company a leaner company with less upside potential and some of the existing games might not be able to be supported. So maybe in 2016 the sales are flat to 2014. So Sales(everything in millions) of $690, COGS of $170, R&D of $200, Sales and Marketing $110, and G&A of $100. This yields and operating profit of $110 GAAP or 16% which is huge. On top of the $1B on the balance sheet and still upside do to the significant R&D budget and you get a company that with 75% of GLUU's multiple is at a $6.6 Billion valuation or $7.33 per share.
Is this going to happen? Probably not. Should it happen? I don't think so because I'd rather see them get a hit and get both revenue and bottom line going. However, all the talk about this company being sold is probably because the folks looking to buy it are doing this math. Either a strategic buyer who thinks they can absorb a lot of the work into their existing infrastructure or a financial buyer who sees quick cost reduction as a means to higher valuation. Maybe killing the dream is more profitable than pursuing it.
I think looking at the run in 2013 to almost $6 is informative. It was all about momentum and hope that they would rebound. Not because they had great earnings or sales trends, only that they were improving. Since then, the reality of how hard that rebound will be has set in.
I think anything below $3 is a great price. Sure it can go down, but only so far.
rossi I have to say that not too many posts on a business message make me laugh. But your third paragraph did, and it's spot on. We do need something great and then only the trolls on this board will complain and still call people names. The rest of us will be vindicated for thinking that Zynga has potential to make money and make us money. But, I think if we hit $3.05 again soon, I'm probably out.
It is a great day for this board IMO when you post. Just added a little the other day hoping for a pop...most of my shares become Long Term in the next couple months. :)
In the last 3 days I have seen more articles mentioning the prospects of getting bought out. Also it doesn't take a genius to see the points I have made about the stock at the current price being a good buy. If you add up the fact that the price has a clear floor due to the cash position, some improvement in game quality, shift to mobile, cost reduction... You have a pretty strong case to be long.
However, even if you do not believe in the long term potential of the company, just add in the hype around new games like DOT, rumors of buyouts, rumors of using the cash to buy someone else, etc... that will give many chances to get out at higher prices.
Even look at this board and the quality of the posts from people that don't like the stock- One talks like a baby, one is anti Semitic and a conspiracy theorist, others are just angry at the IPO. You don't see too may strong arguments against the stock. So why is the stock where it is now? Because it is trading on the valuation in 2016 assuming nothing great happens. Which is reasonable and a very fair price.
However I think the hype and speculation with a few catalysts will get this higher. And if it doesn't? Well it could be at $2.10. Except what happens at $2.10? It gets upgraded on valuation, more buyout talks, more new game hype, more cost cutting and boom back up. This stock is kind of a gold mine.
Luxor Capital Group just filed with the SEC that they've raised their shares in Zynga from 19.15 million shares to 39.86 million shares for a total of 5.1%. That's a significant jump in ownership. It doesn't mean their stake is assured a winner. They could get dumped on like all of us retail shareholders. But, at least they believe in Zynga. I guess we have to take our small victories where we can.
This is a great stock to trade if you look at the volatility. I think it is also great for a longer term(1 year +) with hit potential, cash position, question potential(both them buying and being bought), and general growth in the sector. I think watching it weekly if you aren't trading it is where it can be frustrating.
I posted this thread Monday when the pps was $2.65. I still believe the respite we get from ZNGA stock pps, is only on the weekends. Monday-Friday is a disaster. We lost 7% this week on no news. Shameful.
If something good was happening behind the scenes, the pps action would have held 7-12 cents today despite the indices being down some. It popped on speculation and people thinking that Zynga was getting bought out or going private. Stock prices cannot go up on no news and if they do, they always come down on no news. Zynga is the NSA of mobile gaming. Top secret information.
Don may have felt that selling was the right thing to do but the founder felt differently. I am afraid that if pride gets in the way of business sense, we may be headed for more disappointment.