ZNGA Competition Steps Up Its Game

King, maker of 'Candy Crush Saga,' files for IPO

   

Zynga’s (ZNGA) competition has just advanced to the next level, as King — maker of the hit Candy Crush Sagafiled for an IPO.

Candy Crush Saga was released for mobile devices at the end of 2012 and has become the top-grossing iPhone app of all time. And Pet Rescue Saga — also by King — is currently sitting in the No. 2 spot on the Android platform.

The news comes just as ZNGA is reaching new 52-week highs, breaking above $3.75 and reaching for the $4 mark it hasn’t seen since mid-2012. But does King’s IPO filing spell doom for ZNGA?

Will ZNGA’s History Repeat With King?

King should remember what happened when Zynga stock hit the market. The company appeared to be hitting its stride, surging on the strength of hits like FarmVille, but after reaching highs above $14.50 in March 2012, ZNGA spent the next six months careening toward the floor. Zynga has staged a nice recovery in 2013, up nearly 60% year-to-date, but hasn’t even recovered half its $10 IPO price.

Mobile gamers are not a particularly loyal group. Sure, they love Candy Crush Saga right now, and they seem to like Pet Rescue Saga, but there’s no way to know what the next big thing will be, or when it will hit. Maybe King will be able to develop another successful saga; or maybe ZNGA will find success with the deeper gameplay of Solstice Arena.

Or perhaps a new developer will pop up and deliver something completely new, blowing both out of the water.

So, no, a successful King IPO won’t mean the end of Zynga, but then again, a botched IPO won’t guarantee ZNGA’s future, either.

Zynga stock will improve if the company’s new CEO can get the company to start churning out consistent hits, and it will fail if he can’t, and if the game-maker keeps losing daily active users.

While it’s possible for King to influence those outcomes with the quality of games it releases, the two companies don’t directly affect one another. Investors might recognize the relative strengths or weaknesses of each company, but there’s no true dichotomy here.

The bottom line? ZNGA shareholders should be paying closer attention to Solstice Arena numbers than to King’s IPO.

Adam Benjamin is an Assistant Editor of InvestorPlace. As of this writing, he did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, http://investorplace.com/ipo-playbook/znga-competition-steps-up-its-game/.

©2014 InvestorPlace Media, LLC

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