Perhaps you've heard of Mafia Wars, FarmVille, Café World, and Zynga Poker. Zynga distributes games through social networking sites and via mobile apps. The company makes money through the sale of virtual goods associated with their games and through advertising.
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I'll bite, but only because I'm a sucker for speculative low dollar plays. Zynga hovers at $3.00 with 175 Million shares trading there the last three days, or about a third of the massive float. This could signal a base building, or it could collapse completely as shorts finish covering (or reloading), and buyers fade at $3.00. I wouldn't be surpised if this tumbles to $2.00 to $2.50 in the next few weeks. The positives are few. Zynga gets most of it's revenue from Facebook which is also in the doghouse. Facebook "could" look to Zynga to boost it's own revenues, but Zynga IPO'd at such a high valuation that Facebook would probably rather see it decline further and salvage it from the ashes. An acquisition is rarely (if ever) a good investment and Zynga's $2 Billion market cap is a bit much to swallow with it's steep losses, especially with much of a premium, but the $1 Billion in cash might help offset the sour taste.
Zynga indicates new games are coming and they have a team working on further monitization. Online gaming where you spend hard earned money for imaginary "stuff" appears to be having limited appeal, but the winter months are coming, indoor computer use will rise, and addictions must be feed. I doubt the $3.00 share price will hold, but overall, I don't see Zynga going away with $1 Billion in the bank and some motivated owners, (even if only motivated with pride). Although after an IPO, I often wonder why the founders aren't on their yachts and partying, but again, there is usually part of their DNA that keeps them driving.
Specualtive play, probably better made around $2.50.
That $2.50 looks good.:)
Think I will wait to add to my extremely small "making baby happy" position.
Looks like it is headed in that direction now.
I better get ready.
It's a speculative play now, but I don't think it's at all out of the realm of possibility that if one bought, held, and just forgot about it for awhile, it could pay off.
JMO and worth exactly what I am charging for it.
I had forgotten about your "baby happy" position. I thought for awhile her sentimental dartboard was going to outperform your in-depth analysis!!! ;) One problem with Zynga was that they issued too many shares to start with. It makes for a volitile trade with so many shorts, naked shorts, and speculators hanging around. I do agree it will settle down somewhere, but if it gets much lower it will be classified as a "junk stock" by some investment firms with "guidelines" in thier proxy. Maybe she will be able to treat you to dinner in a few years! ;) Good luck.
They have $1.5B in cash & equivalents. Add in their new office and PP&E and you are getting the business for free. Close to free if you just count the cash & equivalents.
The getting the business for free is sometimes a useful metric on companies down on investor sentiment who are making money. I don't put as much value on cash balance, however, when a company is net negative. It's also a concern that they could burn through cash overpaying for acquistions. I'm also more pessimistic concerning cash on a startup and on a company with leadership that might be erratic.
Overall, however, I do agree it's a bit of a moat for a short time and strengthens options of an acquirer or if put to good use could generate value.
I would rather have had them sub $3 as my gut was telling me. Good luck!
Pincus has stated they don't plan to grow through acquisitions going forward and based on their Draw Something experience I think this will be accurate. Even if you think the temptation might be there to acquire growth the critics have made it clear they'll bash them if they over pay for an acquisition and the market is not going to buy this strategy so what would be the point? They hit a road block in the current quarter but their problems are fixable. Even if a popular game like Farmville lost some steam recently it's not going to zero and with a major upgrade on the way it could even pick up again. Then you have new games being introduced all the time a few of which will likely fair well. They're developing their games in multiple languages in order to expand them internationally. They've signed up a dozen or so third party developers to their beta gaming platform and eventually they'll migrate their entire business to this platform and cut Facebook and their 30% out. In addition to this you have online gambling and the continuing evolution of their reward and ad revenue models. IMO they have a lot of ways to improve and grow this business and the market is discounting all of them right now.