Zynga (NASDAQ:ZNGA) is trying hard to turnaround. Although the company's share price has declined in 2014, it looks like a good investment, primarily because of its investments in mobile. Zynga is at the forefront of an entertainment revolution. The rapid consumer adoption of smartphones and tablets is expected bring unprecedented opportunity, and games are the number one time-based use case for consumers.
In the next few years, more than 1.3 billion people are expected to be gaming on their mobile devices. By 2017, one-third the world's population is forecasted to be using smartphones and the tablet installed base is projected to cross 1 billion. Zynga is targeting this opportunity.
In addition to crossing 4 million installs, Zynga is seeing a number of early signs that FarmVille 2: Country Escape is resonating well with consumers. In the U.S., the game has achieved number one top free app and number one top free game on iPad. On iPhone, the game has achieved the top three positions in the free app and free game charts. Across the Apple platform, it has reached the number one top free app position in 20 countries, the number one top free game in 40 countries and has broken into the top 20 grossing chart on both the iPad and the iPhone in the U.S.
- Warning! GuruFocus has detected 5 Warning Signs with ZNGA. Click here to check it out.
- ZNGA 15-Year Financial Data
- The intrinsic value of ZNGA
- Peter Lynch Chart of ZNGA
The primary focus of the gaming major is to always achieve category leading engagement and retention. FarmVille 2: Country Escape is already showing strong player engagement metrics compared to other Zynga games.
It has created a rich entertainment experience that matters to the mobile play patterns consumers want which is illustrated by the amount of time people are playing them.
Strong engagement with users
Zynga has witnessed strong engagement from these existing FarmVille web players, an encouraging number of new players are coming to the franchise for the first time because of Country Escape on mobile. This is believed to be an important milestone for it with focus on growing and sustaining its core franchises and demonstrates Zynga's ability to sustain its franchises over time and create mobile entertainment experiences that meaningfully engage and extend its games to new large – scale groups of consumers around the world.
At the same time, Zynga expects to deliver both breakthrough consumer experiences and profitability as it continues to align its business around focus, quality and execution. In order to achieve this, it remains focused on doing more with less and achieving more operating leverage across the organization.
Additionally, in the first quarter, Zynga reduced its technology spend by 15%, driven by restructuring and discontinuing one of its data centers. All of these changes have put Zynga in a stronger position to deliver growth in 2014 and beyond.
According to Yahoo Finance, the forward P/E ratio of 51.33 indicates that the stock is costly as compared to the industry’s average of 17.41. However, it is better than Electronic Arts, which has a P/E ratio of 1,373.08. The PEG ratio of 5.13, above 1, depicts slower growth as compared to the industry’s average of 1. Instead, its competitor Electronic Arts has an impressive PEG ratio of 0.80. The current ratio of 3.32 depicts healthy current assets. Therefore, apart from the weaknesses shown in the results above, the company is worth investing in seeing the impressive CAGR for the next 5 years of 30%, which is well above the industry’s average of 18.57%. Hence, investors are advised to bet on this growth story and expect satisfactory returns in the long run.