I have always questioned the fate of gaming companies Zynga (NASDAQ:ZNGA) and Glu Mobile (NASDAQ:GLUU) as they depend excessively on mobile gaming. Despite the fact that both these companies have figured out how to perform pleasantly in the last couple of months, I expect the dispatch of cutting edge consoles – Playstation 4 and Xbox One – will hamper their development in the foreseeable future. Here's the means by which.
Console launch Is bad
Gamers all as far and wide as possible were enthusiastically sitting tight for the cutting edge console cycle. Besides the Christmas season has also determined the sales, and this is awful news for both Zynga and Glu Mobile for two reasons.
1. Both the consoles are decently expensive. Sony's Playstation 4 is evaluated at $399 while Microsoft's Xbox One is selling for $499. Besides, both these consoles are much more expensive in countries like Australia and India.
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2. Console games are extremely expensive.
The mobile gaming business sector will suffer, in any case in the short run, and consequently Zynga and Glu Mobile will struggle to enhance their margins.
Reasons to stay away
Zynga investors have their hopes stuck against the entry of Don Mattrick, Zynga's new CEO. In any case, I think investors should understand that Zynga's turnaround is not ensured, and there are several great reasons for that.
First, I believe that the entry of Mattrick is overestimated, fundamentally because he has a celebrated notoriety. In his time at EA, Mattrick was in the spotlight for dealing with the improvement of outline topping games such as Need for Speed, The Sims and FIFA. Mattrick was generally praised for the improvement of these games, yet these games were only proceeded with franchisees and Mattrick wasn't responsible for rolling out any severe improvements to these franchisees.
Second, Zynga's prominent quarterly performance was a conclusion of Mattrick's cost-cutting initiatives. While there's nothing awful in lessening losses, you can't anticipate that these initiatives will drive long-haul development. Zynga will need to think of diagram-topping games so as to sustain development, and as of now, it is neglecting to meet this objective.
Proceeding onward to Glu Mobile, the organization's late success has solely been determined by Deer Hunter 2014. Anyway this can't go on perpetually and the organization will need to concoct new outline topping games customarily, which I don't think is feasible. Because of the constrained screen size and complex usability of smartphones, its exceptionally troublesome for developers to normally thought of games that draw in gaming fanatics. Thus, anticipating that Glu Mobile will convey blockbuster games normally is not plausible.
A stock worth buying
I am obviously not an aficionado of versatile gaming; however that doesn't mean I have uncertainty about the industry's future. Analysts are estimating the portable gaming business to be worth almost $23 billion by 2017, and I do surmise that this business has a decent future. However, as I said, the console and PC gaming business sector will harm the sales of portable games. The organization is making the right moves to profit from the console, PC and portable gaming business.
Electronic Arts has effectively acknowledged more than 85% in 2013, and it may develop further because of its strong item pipeline. The organization will dispatch numerous new titles to support the cutting edge consoles while servicing consumers using the current era consoles. To attain this, the organization has officially propelled huge numbers of its blockbuster titles.
Also, Electronic Arts has approved a $500 million share buyback, which signifies that the organization is firm on its destination of returning quality to its shareholders. Notwithstanding that, the organization is also focusing on the massive Chinese online gaming business, and has tied up with Tencent. It is wanting to dispatch online versions of its most mainstream games like FIFA and Battlefield.
What's more, Electronic Arts has authoritatively announced that it will go completely advanced within a brief period of time, which means that physical copies the organization's games will never again be sold. A move like this may require some investment yet it has double benefits.
Besides, Electronic Arts is aggressively moving into the lucrative portable gaming business sector and is wanting to release 15 new versatile games one year from now.
Hence, it is important for investors to choose the right stock among the two as gaming can be a fickle business. As such, investors should look more closely at a diversified player for the long run.