Zynga (ZNGA) is one of the few to miss out on the social stocks rally. Since the IPO in late 2011, ZNGA stock is off about 45%. Simply put, many investors have left it for dead.
But the problems may be exaggerated. If anything, ZNGA stock could represent a potential value opportunity for social stocks.
The company now has a new CEO — Don Mattrick — and he’s got a tremendous background. In the early 1990s, he sold his game company to Electronic Arts (EA) and then went on to build franchises like Need for Speed, Harry Potter and The Sims. After that, he became the chief of Microsoft’s (MSFT) Xbox division and pulled off a turnaround.
In light of that success, he could have picked many top companies to work for. But in the end, he thought that ZNGA provided the best opportunity.
So far, he has taken the tough steps of cutting back the headcount. But most importantly, he is focused on strategic issues. For the most part, he is investing in evergreen games like FarmVille, Zynga Poker and Words With Friends. As seen with EA, brands can have a long life, so long as they are continually refreshed.
To make this work, Mattrick made a savvy move to boost the graphics capabilities with the acquisition of NaturalMotion. But the firm also has good mobile chops since it is the creator of the wildly popular Clumsy Ninja.
The turnaround of ZNGA stock is still in the early stages. But Mattrick has been making the right moves.