Have you ever given thought to investing in a gaming company? For one, there are the big gunners and the underdogs, and knowing where to invest can be confusing.
With major brands like Sony PlayStation and Windows Xbox, brands like Zynga may seem like an easy write-off. However, with the current records, you might need to ask: is Zynga stock a good buy? Before writing it off.
Also, see Is Ford A Good Stock To Buy And Hold?
Zynga Inc (NASDAQ: ZNGA) is a social game development company that was among the leading video game stock brands in 2020. Zynga develops and markets interactive games, which run as live services on mobile platforms like Android and iOS. The games also run on social media platforms like Facebook, Snapchat, PCs, and consoles.
The company’s value has continued to rise since Gibeau took over as CEO, with businesses spanning over 175 countries. The company’s expected annual revenue is around 2.8 billion dollars. While the company is relatively small, the growth potentials abound.
However, in 2021, the company’s shares had a downward slide on the chart by about 33%. Hence, is Zynga stock a good buy on the dip? The share prices may likely suffer more with the rise in employment. The case is not peculiar to Zynga alone but affects other gaming companies too. However, with the current economic crisis and loss of jobs, more people will likely fall back to video games for consolation.
What is Zynga (ZNGA)?
Zynga Inc. (ZNGA) is a developer and provider of social games for entertainment purposes. The company’s main target is the social networking platforms like Facebook and Instagram.
Zynga games are also available for Android and iOS operating systems and PC versions. The company also develops games for video game consoles like the Nintendo Switch.
Some of the social media games from Zynga include:
- CSR Racing
- Empire and Puzzles
- Farm Ville
- Merge Magic
- Toon Blast
- Words with Friends
- Toys with Friends
- Zynga Poker
- Merge Dragons
- Casual cards
- Social Slots
- Mafia Wars
- Bingo Blitz
Zynga also operates a live service platform that enables it to understand players’ interactions with its games. Using the collected data, the company offers better gaming and interactive experience. Data also helps the company to provide better ad and site monetization services.
The company was founded in 2007 in San Francisco and became very popular after its partnership with Facebook.
Today, Zynga provides standalone mobile titles for many of its popular games. The company relies on in-game purchases and ads to monetize its games. While some may have issues regarding this method, it remains a determining factor in the company’s financial success over the years. Today, the company is a global brand.
ZNGA grows its assets through partnerships, acquisitions, and mergers with other brands. Over the year, the tech company has partnered with big names like Google (GOOGL), Baidu (BIDU), and Microsoft (MSFT).
In 2021, Zynga’s active Facebook followers topped 30 million daily users. The company has a broad audience both on Facebook and on its official website Zynga.com.
The company also provides free games for its followers through other social media platforms. Users can choose to purchase in-game items for a better gaming experience.
Consider checking How to Buy DWAC Stock In 2022
Why did Zynga Stock Drop?
Even though Zynga remains very popular, its active users began to decline in the summer of 2021. Notwithstanding, the company recorded a second-quarter income of $712 million, which is a 37% year-over-year increase.
The main reason for this decline in ZNGA stock stems from changes to Apple’s privacy. The changes made it difficult for the company to grow its active monthly iOS users of about 205 million.
The decline has become a source of concern to bearish investors. They believe it might be difficult for the company to continue its growth trajectory. Over the past years, the company grew its user base by almost 300%. However, there is still a lot of ground to cover in the broad gaming industry.
Nonetheless, the company stands to benefit from the current lawsuit ruling between Epic Games Vs. Apple. The backdrop of the ruling is on in-app purchases for games.
Zynga stands to gain a lot of it can find ways to make its audience bypass Apple’s payment method to pay directly through their method.
Is Zynga Stock a Good Buy?
For old investors who lost money investing in Zynga at its peak, it is best to hold from investing till the stock recovers. Notwithstanding, new investors who are optimistic that Zynga funds will recover can buy the dip. Due to the 10 percent loss, the company suffered after its earnings. Many investors began to shy away from investing. However, the company still looks promising, going by its reports from the past 12 months.
Zynga will most likely be able to hold a ten billion valuation due to its robust income flow and low valuation. Hence, is Zynga stock a good buy? The answer depends on whether you are a new investor or an old one. Over the years, analysts all agree that Zynga is underweight. The estimate for its stock price is $12 value. However, Zynga’s price-to-sales value is -33% lower than its value a year ago. On the other hand, the $161 million in operating cash flow of last quarter shows an 11% increase over the year.
The news of the ruling by the government against Apple’s in-game payment tax also offers some temporal boost to Zynga. While the company’s stock price may be low now, it remains a promising venture. Recently, the company spent a lot of funds purchasing companies like Rollic (with over a billion followers) and Chartboost.
Chartboost is an advertising and monetizing firm that boasts a global view of 700 million+ every month. The company also hopes to extend its reach to the Asian market by acquiring Starlark. The deal cost over 252 million dollars and will help to boost the company’s presence in the Chinese market. As these expenditures begin to play into Zynga’s revenue stream, it has the potential to yield long-term benefits.
The Current Merger between Take-Two and Zynga, What Does it Imply?
The deal was first announced in January 2022 and concluded in May of the same year. It was the first of the many blockbuster gaming acquisitions that followed. At the point of the announcement, the purchase was the biggest in the video gaming industry, closing at a whooping sum of $12.7 billion. With the acquisition, Take-Two will have own Zynga’s expertise and gain ownership of its big franchise like FarmVille.
While Zynga needs the revenue, the deal has a lot of positive implications for Take-Two as a gaming company. Take-Two is the company responsible for popular titles like Grand Theft Auto, Civilization, and Bioshock. It will most likely expand its prominence in the mobile gaming platform through the merger. In an investor statement by Take-Two during the period, the company promises to extend more of its franchise to the mobile platform using Zynga technology.
What this merger entails is a win-win situation for both companies. While Zynga benefits from Take-Two’s popularity and financial prowess, the company will benefit from Zynga’s well-established mobile gaming platform to penetrate the market. The deal has a promising future, even though the gaming industry remains a volatile investment.
A recent deal by Microsoft and Blizzard( $68.7 billion) surpasses that of Zynga. However, the Zynga-Take-Two merger serves as a benchmark for the profitability of the gaming industry.
Pros and Cons of Investing in Zynga Stocks
1. The growth of the mobile industry
According to current statistics, many people spend most of their time on mobile devices. IDC reports show that the number of hours people spend online on mobile devices surpassed over 63 billion in 2017. The expansion of the mobile industry will also have a direct implication on the performance of the mobile gaming industry.
Therefore, investing in a brand like ZNGA can be a step in the right direction. The company remains one of the leading companies when it comes to mobile gaming. Since the company transitioned to mobile gaming, it has grown in the area of subscribers and advertiser revenue.
With the concluded acquisition deal of Zynga games by Take-Two, there is most likely a bright feature for the company’s share performance in the coming years. The mobile phone industry looks promising, with more people opting for portable devices. Zynga remains at the fore of companies providing mobile entertainment to the general public.
2. The Company demonstrates strong leadership qualities.
Since Don Mattick assumed the leadership of Zynga as the CEO, the company has had strong leadership competence. Some of the profitable move by Mattick as a leader includes closing down underperforming studios and games. He also cut down the workforce to save income on expenditure. Another prominent action is the purchase of Natural Motion. The company is the developer of hit games like CSR Racing and Clumsy Ninja.
Mattick’s outstanding performance dates back to his achievements as a company owner at age 17 (Distinctive Software), which he later sold to EA. He later went on to become the president of Worldwide Studio at EA. He was part of the team that helped create mega games like The Sims, FIFA, and Need for Speed.
He also had a good running time at Microsoft, where he helped to make the Xbox franchise more profitable. His wealth of experience was very impactful on ZNGA and led to the review of old games and the development of a new franchise. Hit It Rich was one of his famous titles.
3. Financial stability
Even with the recent challenges, Zynga retains a constant operating cash flow. With a large deposit from mergers and acquisitions in the bank, the company is well-positioned to fund new games.
Cons of Zynga Stock
1. High competition rate for ZNGA
One of the main challenges facing ZNGA is the high rate of competition. The company competes with big brands like EA, and Supercell, which are all well-developed with great franchises and quality teams. Other times, it’s the small brands like Flappy Birds that provide tough competition for the company. Also, Facebook poses some challenges with its purchase of Oculus, the VR goggles. If it pushes ahead with its plan of immersive game development, it will be a heavy blow to Zynga.
2. The Difficulty with mobile distribution lately
With thousands of titles and new ones making their way to the app store, distribution has become more difficult for game developers. The recent approach is to attach a fee to each installation. The move has become a great business opportunity for platforms like Facebook and Twitter. However, the problem is that the amount is usually very high. Even companies like ZNGA are also facing the pressure arising from installation costs.
3. The video game business is a “hit business.”
The video game business relies on continuous hit streams to stay in business. It is not always easy to develop the next blockbuster game. As such, it’s easy for a company to run out of business in the industry. Measuring what a consumer wants from a video game can be difficult. The case also applies to ZNGA, a company prominent for its multiple layoffs.
Also, check out: Is Wish Stock A Good Buy Now Or Sell
How to Buy ZYNGA Stock
#1. Compare various share trading platforms
Utilize investment platforms like finder.com to compare different platforms to find what best suits your needs. Once you find a suitable investment platform, do your research to determine the credibility and financial strength of the company. While platforms like finder will provide you with the necessary information, personal research will provide in-depth understanding.
#2. Open a brokerage account
The next step is to create a brokerage account and register with your details. Many platforms now provide online registration opportunities for clients. Decide what is best for you and proceed to complete your registration.
#3. Find the Stock
There are two ways to find Zynga on the stock market–by its name or the ticker symbol. Always research and determine the performance and prospects of a stock before investing your money.
#4. Buy with a market or limit order
Once you find the ZNGA stock, select the number of shares you need and proceed to buy. There are two ways to buy shares. The first is with a market order, which allows the instant purchase of shares. The second is with a limit order that delays your purchase till share prices hit your benchmark.
Avoid throwing all your funds into one investment. Stick to the 1-2% investment rule for each trade. Use a stop-loss order when necessary to prevent your shares from incurring further losses. Consider the process and risks before proceeding to make payment.
Afterthought–Is Zynga Stock a Good Buy?
In the last five years preceding 2021, Zynga was among the top-performing game and mobile entertainment providers. However, the stock values took a downward slope from 2021 to 2022, which became a source of concern for many investors. Nonetheless, for new investors hoping to buy the dip, this is an opportunity to invest. Also, if you have a great appetite for risk, Zynga can be a good option.
With the current acquisition of the company by Take-Two, Zynga shares may likely appreciate in the coming years. Nevertheless, always keep in mind that the gaming industry is very volatile. It is difficult to determine what people want from the gaming experience. Therefore, predicting the future of your stock can be almost impossible.
Again, according to Zynga’s stock forecast for 2022, the company’s stock performance remains low. The price only manages to reach $8.18, which is still below its target price of $10.39.
Is Zynga a good buy? For those with a risk appetite, it can be a good opportunity. New investors hoping to buy shares at discount prices can also invest in Zynga. However, if you cannot afford the risk, it is best to hold your funds. There are other safer investment opportunities available that you can consider. What is your opinion about the future of Zynga stock? Do you think it is promising or too risky an endeavor? Let us know your view in the comment section.
You can check out: Is AMC A Good Stock to Buy Now?
FAQ – Is Zynga Stock A Good Buy Now?
Zynga insiders own 5.55% of the shares, while 83.6% belong to institutions.
December is the end of Zynga’s fiscal year.
699 Eighth Street, San Francisco, CA, United States, 94103 is the company’s current headquarters.
Zynga’s ticker symbol is ZNGA.
Yes. Zynga’s ISIN number is US98986T1088.
Wall Street analysts agree that hold is best for any shareholder with Zynga. It is not advisable to buy more ZNGA shares or sell existing shares for now.
They include brands like Autohome (ATHM), Bilibili (BILI), Clarivate (CLVT), DXC Technology (DXC), Five9 (FIVN), Playtika (PLTK), Pegasystems (PEGA), RingCentral (RNG), and ironSource (IS).
- Nasdaq.com—Is It Too Late to Buy Zynga Stock?
- theverge.com—Take-Two has officially acquired Zynga
- finder.com—How to Buy Zynga Stock
- Bloomberg.com—Take-Two to Buy Zynga in $11 Billion Mobile Gaming Deal
- cnbc.com—Zynga Inc (Pre-Merger)
- marketbeat.com—Zynga Stock Forecast, Price & News