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Zynga, Inc. Message Board

  • investora2z investora2z Nov 21, 2013 6:54 AM Flag

    More momentum

    The court ruling has boosted the stock as it continues to make new 52 week highs. The uptrend seems to have gained momentum as the volumes are relatively high. The last few weeks have been particularly good. The Jury found that Zynga had not infringed on the patents of Personalized Media Communications in its game titles. This helped it avoid $25 million in royalties, and will deter others from filing suits. Despite the great run, the stock is still significantly lower compared to its peak in early 2012. However, the uptrend in the stock is not totally based on the fundamentals. The revenues have been falling over the last few quarters, and the improvement in bottomline (reduction in losses) is also not consistent. It is important to remember that, apart from hopes of improvement due to the new top management, nothing remarkably positive has happened fundamentally. However, the company did better than expectations in the last quarter, and was cash flow breakeven. Full year profitability on a net basis is far away, but the improvements are welcome. More such quarters are required to believe that the trend of improvement in fundamentals is in place. The competition is immense with existing players like Electronic Arts (EA) and Activision (ATVI), and new entrants like MGT Capital Investments (MGT) attempting to attract users through novel creations & strategies. However, Zynga is surely on an uptrend, and one can tag along with a stop loss. The new CEO has a successful track record in the industry, and he is expected to take the company to profitability. The social mobile games industry is expected to grow at a good pace, and the management needs to leverage that to its advantage. Most importantly, the costs have to be kept under control. The fact that it is a debt free company with good amount of cash does help matters.

 
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