When it comes to Zynga (NASDAQ:ZNGA), investors only seem to care about one thing right now: real-money gambling.
The company’s Facebook (NASDAQ:FB) business has faltered, and Zynga still is trying to find ways to get traction with mobile games. But when it comes to real-money gambling, Zynga could be in an ideal position.
Good thing. Nevada just legalized it.
ZNGA shares have shot up nearly 20% in two trading days both on the news that Nevada gave a green light to real-money gambling over the Internet, and on the hope that other states — such as New Jersey, which has made moves in that direction — eventually will follow suit.
Zynga had applied for a gaming license in Nevada, which could be approved within a year or so. The company also previously struck a partnership with Bwin.Party Digital Entertainment, a provider of real-money gambling in Britain.
The U.S. market likely is the largest opportunity. Yes, other operators — including Glu Mobile (NASDAQ:GLUU) and Caesars Entertainment (NASDAQ:CZR) — are gunning for it, but Zynga could be the biggest beneficiary. Its Zynga Poker franchise has a staggering 26.4 million monthly active users, according to AppData.com, and it’s not unreasonable to think Zynga could get part of its user base to convert to real-money gambling.
BMO analyst Edward Williams thinks the revenue opportunity for online gaming could be “in the billions.”
If so, Zynga’s stock — which currently is inexpensive at a low 1x enterprise-value-to-sales ratio — could have much more room on the upside.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of “How to Create the Next Facebook” and “High-Profit IPO Strategies: Finding Breakout IPOs for Investors and Traders.” Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.