After a couple years of turmoil, Zynga (ZNGA) is showing some signs of getting back on track. ZNGA stock is actually up about 50% for the year.
Part of that performance has been a result of the buzz surrounding the upcoming King Digital Entertainment IPO. (The company developed the hit Candy Crush Saga). But ZNGA stock is also benefiting from savvy moves from its new CEO, Don Mattrick. In fact, he talked about those moves during a presentation at the Morgan Stanley (MS) Technology, Media and Telecom Conference.
Mattrick definitely has a great track record. Early in his career, he sold a gaming company to Electronic Arts (EA) and then went on to build franchises like Need for Speed, Harry Potter and The Sims. After that, he took the top spot at Microsoft’s (MSFT) Xbox division and pulled off a turnaround.
Reviving ZNGA stock will likely prove his biggest challenge, but it certainly is encouraging that Mattrick sees the company as the best opportunity in gaming. Of course, his first step has been to cut the headcount down to about 2,000 (down from 3,400) and stabilize the operations.
Now the focus is on getting users interested in ZNGA games. To do this, Mattrick has been pouring resources into evergreen franchises like FarmVille, Zynga Poker and Words With Friends. These remain popular games, and the key is to give the titles more attention, especially on the mobile side.
Let’s face it, EA has shown that brands can last for many years — and provide predictable revenue streams. The future of ZNGA stock depends on Zynga doing the same.
One key to improving ZNGA titles is having state-of-the-art graphics. That’s why Mattrick recently bought NaturalMotion, which has spent 12 years building procedural animation technology. It has been the foundation for special effects for The Lord of the Rings and other films. NaturalMotion is also the developer of the wildly popular mobile game, Clumsy Ninja.
OK, then what about the potential of real-money poker as well? Well, Mattrick indicated that there are pilot programs in various countries. But looks like any payoff for Zynga stock could take a while.
The fact is that a large share of mobile monetization comes from games. More importantly, the market is expected to grow at a strong pace, with more than 2 billion people expected to have smartphones within the next few years. So focusing on core titles makes a lot of sense.
Right now, it looks like Mattrick is doing everything humanly possible to get Zynga back in the game. And if the strategy continues to work, the impact could be a game-changer for ZNGA stock.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.