When You See a Zynga Hit Percolating, Don't Wait

 | Oct 30, 2013 | 10:15 AM EDT
  • Comment
  • Print Print
  • Print
Stock quotes in this article:




I was away last week for the Zynga (ZNGA) earnings call, so I wasn't able to comment on it here. But I still wanted to chime in with a few thoughts, given that I've discussed it several times over the past four months.

Going into the call, the big catalyst I was looking for was a headcount reduction. We didn't get it.

I still think this is very likely, and that it will probably happen in the next month or so. New CEO Don Mattrick has now had well over a quarter to size things up, and I believe he will likely want to get the cuts announced before the end of the year so he can turn the page for 2014.

That's the biggest near-term catalyst I see. As an investor, you're still protected on the downside with Zynga's cash and assets, which continued to hang on in this past quarter even as the number of monthly and daily average users (MAUs and DAUs) kept falling.

The biggest thing that will send this stock higher in 2014 will be a hit game -- or two. A boy can dream. There are no guarantees in the mobile-gaming world, but I still believe Zynga under Mattrick will be able to surface a few good ones over the next year.

When they come, you should look for the stock to start rocketing upward on the first signs that they're become hits. Don't wait for the earnings. Look to get into the stock earlier than that. Watch out for buzz among gaming blogs and, of course, monitor the game charts for early signs.

Glu Mobile's (GLUU) ascent over the past six weeks, with its "Deer Hunter 2014" game, offers a good playbook for how Zynga's stock should react on the news of a hit game.

When these games crack the top 10, they are so profitable that these companies print money. There's also a virtuous circle that goes on with these hit games: The rich get richer. If you're able to crack top 5, you really make money, and then you have a chance of staying on these charts for longer.

The day will come for Zynga. Don't expect a big move from the stock in the next four to six months, though -- except for a spike on job cuts.

The big play for Zynga will come on news of a hit game. It's then that this stock will have a good chance of doubling or tripling.

Columnist Conversations

today is a good day to lighten the load and take some positions off the table. SOLD WB OCT 85 CALL AT 11 (i...
I reached out last week to my close friend Ken Shreve, who is a prominent writer for the IBD.  I asked Ke...
I reached out last week to my close friend Ken Shreve, who is a prominent writer for the IBD.  I asked Ke...
View Chart »  View in New Window »



News Breaks

Powered by


Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.