Zynga Inc (NASDAQ:ZNGA), the struggling mobile game developer who rose to prominence with its hit Farmville game for Facebook Inc (NASDAQ:FB), is now attempting to get more on-trend with its new action-strategy game Dawn of Titans.
It’s about time something came along with the potential to get ZNGA stock moving. Shares are off 56% in the last year alone, miserably underperforming the S&P 500 (INDEXSP:.INX) and its 11% gains as Zynga failed to excite gamers with spinoffs of its most successful titles.
ZNGA Desperately Needs Dawn of Titans to do Well
Revenue has been falling off a cliff for ZNGA in recent years, slumping 32% in 2013 and 21% in 2014. But it’s not like the company hasn’t been trying to stimulate growth — it has just been woefully inadequate at doing so and hopelessly out of touch with today’s gaming zeitgeist.
After ZNGA stock’s most recent earnings miss, I dubbed Zynga the poor man’s King Digital Entertainment PLC (NYSE:KING) and briefly outlined its strategy missteps:
“Zynga is trying to lengthen the tail of its successes with games like FarmVille 2, CastleVille, ChefVille and CityVille. ZNGA also launched New Words With Friends, but it was a commercial failure. So it’s not that Zynga isn’t trying spinoffs … it’s just not having any success.”
The Dawn of Titans release is a step in the right direction for Zynga stock, which desperately needs some sort of catalyst ASAP if there’s any hope for a turnaround.
As ZNGA pivots from being primarily a social game developer to a mobile game developer, its focus shifts from Facebook to the app stores of Apple Inc. (NASDAQ:AAPL) and Google Inc (NASDAQ:GOOG, NASDAQ:GOOGL). Not coincidentally, Dawn of Titans is very much in the mold of action-strategy games Clash of Clans and Game of War, which, according to ThinkGaming.com, are the top two grossing games on the iPhone, hauling in $1.7 million and $1.2 million in revenues daily.
Since he took the reins as ZNGA CEO in 2013, Zynga has steadily increased its focus on mobile, which accounted for just 27% of Zynga’s bookings upon his arrival. Today, that number is 60%.
With the Dawn of the Titans release, ZNGA’s $527 million acquisition of NaturalMotion last year is being put to good use. And the early reviews are good, with VentureBeat calling the game an “impressive technological leap,” and alistdaily.com describing it as “exceptionally beautiful even on a big screen.” If the hype is true, the game could give Clash of Clans and Game of War a run for their money.
Dawn of the Titans is currently in a soft-launch mode, debuting in limited geographies as the company gauges the response.
ZNGA stock won’t be reinvigorated until the company starts experimenting with new offerings — new offerings like this. Dawn of the Titans, if successful, could actually drive growth at Zynga in 2015, a year in which analyst expect zero revenue growth. On the other hand, we could see ZNGA stock dip below $2 per share if it flops.
I’m optimistic. There’s nothing wrong with following the trend, and with the Dawn of the Titans release, Zynga hopes to get that ZNGA stock price trending higher for once.
As of this writing John Divine was long shares of AAPL stock, GOOG stock, and GOOGL stock. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
