Zynga Inc (NASDAQ:ZNGA) is at it again, with ZNGA stock down over 7% today after second-quarter earnings results that were very disappointing.
This seems to be the perpetual story of the mobile gaming company — one big step forward followed by one big step back, with ZNGA stock moving around a lot but never really going anywhere long-term.
The latest Zynga earnings are evidence of this trend. Take a look:
- ZNGA stock met expectations, but still failed to turn a profit.
- Zynga earnings beat revenue estimates, but sales are still way down from prior years
- The company continues to tout a turnaround with new game launches, but saw a 7% sequential decline in daily users over last quarter.
The long-term trend of Zynga is not something that pleases many investors. ZNGA stock is down about 80% from its 2012 high of almost $15, an inflated price level that came about both because of irrational optimism as well as by shady accounting practices. The more recent history isn’t much better, with shares half their 2014 high of about $5.50 and the stock never staying above $3 for long across the past two years.
But swing traders may not be interested much in this multi-year trend. Instead, they are simply looking to harness the volatility of ZNGA stock and ride it to a quick gain when they can.
So does such an opportunity present itself after the latest Zynga earnings?
Perhaps.
Click to Enlarge If you look at the charts, the mobile gaming stock hasn’t pushed through its 50-day or its 200-day moving average. Furthermore, the RSI or relative strength indicator is pretty much neutral on ZNGA now after this drawback, hinting that this isn’t a catalyst for a breakdown.
Furthermore, ZNGA stock has been largely rangebound since mid-2014 and every time the stock has dipped below the $2.50 mark, it has signaled a buying opportunity.
I don’t know if I would be purchasing shares today on a low-volume summer Friday, or even Monday immediately after Zynga earnings are fully digested. However, if we see a broader pullback in the market that helps force this stock down into the $2.50 range, investors could make a quick 10% to 20% over the next few months.
There is little visibility into the long-term potential of this stock, as is so often the case with consumer tech companies. Mobile gaming is notoriously competitive and gamers notoriously fickle, so it’s up to the next line of titles to break ZNGA stock out of this long-term funk.
However, this is a company with a third of its market value in cash on its balance sheet and one that isn’t going anywhere in the short term.
If you’re looking for a cheap stock under $3 to swing-trade on sentiment, ZNGA stock is as good a candidate as any this summer.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP. As of this writing, he did not hold a position in any of the aforementioned securities.
