Zynga (ZNGA), the online gaming company once left for dead, is having a resurgence of sorts, up 24% since the start of the year. Eric Jackson, founder of Ironfire Capital says it’s one or two good games away from doubling or even tripling in share price.
“You gotta look at the risk and reward,” he says. “I think there’s limited downside with Zynga because it’s got a lot of cash still, it’s got it’s fancy schmantzy real estate in San Francisco, and then on the upside people are assuming this thing will never develop another successful game ever and the world we live in now...you got one “Flappy Bird” and suddenly the money starts rolling in the door.”
Jackson goes on to give Zynga founder Mark Pincus credit for acknowledging his own shortcomings as a boss and passing the reigns on to Don Mattrick, formerly of Microsoft (MSFT).
One key reason Zynga suffered so much in the waning days of the Pincus era was the failure to move more strongly into mobile. While games like Angry Birds, Candy Crush, and more recently the aforementioned Flappy Bird were raking in the dough, Zynga was building games for Facebook (FB) and the desktop.
Still, Jackson says Zynga is one of only a few gaming companies in the world that are making buzzy games and even though they are no longer at the top of the list, it won’t take much to drive the stock even higher, if they start thinking a little more like Hollywood. “It is possible to be like a successful movie company,” Jackson argues, “and learn what kind of hit movies or games can continue to draw audiences. If you do get that magic formula it’s amazing how much money these games make."
So should you pile into shares of Zynga? The bottom line, says Jackson, is that “you’re basically taking a bet that Zynga will be able to come up with something that will attract a big audience, and when it does the price will rocket just like it did after its successful most recent earnings.”
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