ZNGA – Analyst Provides Long-Term Hope for Zynga Stock

by Adam Benjamin | October 16, 2013 11:32 am

ZNGA – Analyst Provides Long-Term Hope for Zynga Stock

Zynga185 ZNGA   Analyst Provides Long Term Hope for Zynga Stock[1]Don Mattrick has been leading Zynga (ZNGA[2]) for the past three months, and the results for ZNGA stock have been mixed, flashing no early signs of how his tenure might go.

Eric Jackson, founder of Ironfire Capital, wrote about how ZNGA has fared[3] under Mattrick’s admittedly short rule, and he had good news and bad news for investors.

The good news: Mattrick has instilled a sense of accountability in ZNGA, and seems to have earned the trust of founder Mark Pincus. The bad news: The current slate of games isn’t spectacular, and investors might have to wait a year to see the products of Mattrick’s Zynga.

ZNGA on the Long Road to Recovery

Jackson’s analysis held considerably good news for long-term investors. The fact that Mattrick is being given the freedom to do his job is vital for ZNGA. Turnarounds require doing things differently — that’s a difficult order in any situation, but especially challenging when the former CEO is still hanging around company HQ.

But Pincus apparently is letting Mattrick do the job he was hired for, giving Zynga a much better chance for success.

Jackson also thinks ZNGA has a great board, and says the fact that board members have stuck around through the company’s troubles is a great sign.

Even with the backing of a good board, Mattrick has his work cut out for him. Zynga hasn’t released numbers for new games like CastleVille 2 or Solstice Arena, but those titles seemingly haven’t reached the same levels of popularity as old hits like FarmVille and its sequel — at the least, neither shows up in the top 100 free apps on Google Play[4] or the iOS App Store[5].

Next week’s earnings report should give investors a better look at how well (or how poorly) those titles have performed; expect ZNGA stock to move in line with the company’s daily active users.

Lastly, Jackson said he believes Zynga needs to cut jobs (again) in the near future, pointing out that ZNGA has nearly four times as many employees as its nemesis, King (the Candy Crush Saga-maker that recently filed for an IPO[6]). Cutting back on jobs would mean cost savings, which would have a more immediate effect on the stock.

So the ZNGA recovery might not be dead … it just might need a long time to come to fruition.

Adam Benjamin is an Assistant Editor of InvestorPlace. As of this writing, he did not hold a position in any of the aforementioned securities.

Endnotes:
  1. [Image]: http://investorplace.com/wp-content/uploads/2012/05/Zynga185.jpg
  2. ZNGA: http://studio-5.financialcontent.com/investplace/quote?Symbol=ZNGA
  3. how ZNGA has fared: http://www.thestreet.com/story/12066560/1/zynga-ceo-needs-to-whack-headcount.html
  4. Google Play: https://play.google.com/store/apps/category/GAME/collection/topselling_free?hl=en
  5. App Store: http://www.apple.com/itunes/charts/free-apps/
  6. recently filed for an IPO: http://investorplace.com/ipo-playbook/candy-crush-sagas-new-game-an-ipo/

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