Are Worries for Zynga Short-Sighted?
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On Tuesday, Zynga's (NASDAQ: ZNGA) stock has fallen to a new low of $4.82. It has been suffering since Facebook's IPO stumbled through the gates and has been hit even harder with new analyst reports. In particular, Cowen & Co. analyst Doug Creutz gave Zynga a neutral rating on Tuesday due to a significant decline in users.
The worry is that gamers are shifting from Zynga games (predominantly on Facebook with little competition) to other games on mobile devices, where competition is stiffer and Zynga holds less of a presence.
But is this concern short-sighted?
Zynga has already announced that it is "aggressively pursuing mobile development." This should inspire confidence for investors as it sounds much more optimistic than, say, Facebook, which has admitted it is unsure of how to monetize its mobile experience.
Some say Zynga is off to a good start when today it took its smash-hit “Draw Something” mobile app global. Partnering with Enrqique Iglesias and Jennifer Lopez, "Draw Something" will be made available in 12 new languages and will be promoted on a North American Tour.
One aspect fallen away from discussion is the quality of Zynga's games. Whether you play FarmVille or not, Zynga is able to tap into a unique pleasure among gamers which captures their attention and even entices them to buy virtual items. In doing so, it expanded its user base far beyond the standard youth gaming market and amassed users of all ages. Nintendo's Wii did the same thing, attracting customers from the ages eight to eighty playing games like Wii Sports.
Detractors state that competition from other game companies such as EA will give Zynga a run for its money on mobile devices. This may be true, but Zynga may have a long-term advantage of knowing how to produce simplistic games that have mass appeal, whereas other game makers are geared to a more limited segment.
Tarek Zaheer holds stock in Zynga for an investment. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.