Zynga’s (ZNGA, Financial) stock has gained about 40% this year as the company has executed a couple of potential moves that has been well received by Wall Street. First, it hired Don Mattrick as the CEO of the company, which was an indicator of its strong wish to turnaround its business and attain profitability. Second, Zynga is making concrete investments in two of its biggest franchises, Casino and Word with Friends, which will allow the company to tap into the Casino and Mobile categories to drive long-term growth for its investors.
Growth moves
Zynga is concentrating on three key strategic areas that should drive its growth. First, it is looking to grow its business based on the hits that consumers have validated over the past couple of years. Secondly, the company is strategically engaged in enhancing its capabilities to create new hits to complement its growth. And third, it is determined to execute both of the above in a more efficient way that leads to sustainable long-term growth for investors.
In fact, its fourth-quarter results indicate that these investments in its core business have started bearing fruit, mainly in Words with Friends and Casino franchises. The Casino franchise posted impressive double-digit growth for the first time after seven quarters, with tremendous improvement in Zynga Poker.
Besides, Zynga has stabilized its revenue in its flagship Poker product by taking decisive actions to combat fraud and create a more trusted, higher-quality consumer experience.
In addition, its slot product “Hit It Rich” has gained traction in recent times and is one of the fastest-growing segments in the casino category. Also, the company is determined to bring in many new games to meet demand of this highly-engaged community. Zynga further plans to launch its latest mobile slots product, Riches of Olympus, to global audiences.
Moreover, its outlook for the current quarter remains pretty healthy, excluding Natural Motion, which Zynga had acquired in February 2014. Its total bookings are expected to be in the range of $130 million to $140 million. Also, some references indicate that there is a high expectation of achieving sequential growth in each successive quarter throughout 2014.
Further, the diversification of its cross-platform revenue mix is expected to show substantial improvements for the remainder of the year across audiences, bookings, and adjusted EBITDA. Hence, Zynga no doubt looks appealing and solid.
Mobile initiatives
Zynga is strategically engaged in executing various initiatives. It is continuously focused on growing and sustaining top franchises, creating new hits, reducing costs, and growing on mobile. Also, there is a major shift in its content pipeline to mobile screens.
In addition, the company is planning to bring FarmVille to mobile. This new launch is expected to appeal to more than 400 million people around the globe who played its FarmVille franchise on Facebook. Also, Zynga has witnessed significant shift in consumers’ gaming habits, with bookings from the mobile platform expected to account for more than 50% of Zynga’s bookings base in 2014. In the new product pipeline, 75% of all new games in development are mobile first to cater to this shift.
Besides, Zynga has increased its focus on running over 30 live services and has allocated time and resources to create several new products. This displays its ability to learn valuable customer insights and think about how it can differentiate its offerings relative to competitors. Zynga also plans to move aggressively into new genres that align with timeless entertainment categories that consumers care about.
Also, the company is expected to benefit from the recent acquisition of NaturalMotion that should allow Zynga to significantly accelerate its growth trajectory going forward. Zynga can significantly expand its creative pipeline, accelerate mobile growth, and bring next-generation technology and tools to Zynga that will fast-track its ability to deliver more hit games.
Conclusion
All-in-all, 2014 looks like a great year for Zynga. Zynga seems to have the right strategy in place to win by delivering popular games, and grow and sustain its franchises. The company has come out of a rough phase and looks set to scale new heights, making it a solid long-term investment.
