Thursday, September 24, 2015

Can Anything Save Zynga Stock From Its Deathbed?

It's time to put this former social giant out to pasture

Do you remember Zynga (ZNGA), the company responsible for all of those annoying Facebook (FB) games, such as Farmville, Mafia Wars and Bubble Safari? Zynga games were all the rage for a long time, and at one point there were as many as 61 million people playing Farmville every month.

Management chose to take the company public; and in December 2011, Zynga stock became the largest Internet-related IPO since Google (GOOGL, GOOG) debuted in 2004.

But, eventually the novelty of the games wore off, and FB users became tired of the unending barrage of incessant requests for bricks, seeds, plants and animals. After countless complaints about Zynga game notifications, Facebook institued policy changes that eliminated those notices — and stifled ZNGA traffic. In March 2012, Zynga purchased OMGPOP, a competing social game maker responsible for Draw Something, for $200 million.

At the time, Zynga stock was popular — shares had reached an all-time high of nearly $15. But ZNGA began plummeting, and by the end of August it was trading below $3.

Could Anything Have Saved Zynga?


In a word, no. The social gaming arena is frighteningly volatile, and subject to countless risks, nearly all of which are beyond control.

People are finicky creatures, and there’s no telling which games social media will find interesting tomorrow. Further, even if a game becomes popular, there’s no telling how long it might remain there or how long until it’s yesterday’s news.

Zynga’s value was, initially, based on the success of its relationship with Facebook and its status as a premier partner. Without FB, Zynga is no different than any other game developer, and the challenges faced by mobile game companies are immense.

The social gaming market in the U.S. is expected to grow at a compound annual growth rate of nearly 20% through 2019, and the competition to grab a piece of that pie is as cutthroat as it gets.

Unfortunately for ZNGA, there are more than a few other game developers with deep pockets and innovative titles.

Bottom Line on Zynga Stock


Despite fervent cost-cutting measures and some CEO ring-around-the-rosy, ZNGA has been unable to regain any of its former luster. Massive employee layoffs, new game titles and a multi-year partnership with Warner Brothers (TWX) still hasn’t been enough to entice tech investors to buy more shares.

Zynga stock trades below $2.40 per share, and there’s little to suggest that a turnaround is on the horizon. By this point, it would appear that most of the investors initially interested in ZNGA a few years ago have long since bailed. The chances of Zynga stock surging are nonexistent, as Facebook games don’t elicit the type of addicted, excitable response that they did a few years ago.

ZNGA appears doomed, and the lack of buzz in its transition into mobile just goes to show that nobody’s even that interested anymore.

This article originally appeared on InvestorPlace (09/24/2015)