This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Zynga: Cheaper Than Virtual Coins

Stocks in this article: ZNGA ATVI TTWO

Editor's note: As part of our partnership with Nightly Business Report, TheStreet's Debra Borchardt will join NBR Monday (check local listings) to look at video game stocks as Zynga continues to lose the game.

NEW YORK ( TheStreet -- Expectation runs high for Zynga (ZNGA - Get Report), but if investors leave the virtual world and compare real numbers, Zynga loses. This newbie stock is a waste of investors' money.

The top game companies include Activision (ATVI - Get Report), Electronic Arts (EA) and Take Two (TTWO). All three saw their shares hit highs before the financial crisis. Since then, Activision is the only stock to attempt an uptrend in its share price. EA and TTWO have both languished.

Zynga fans will point to its mobile/social gaming aspect and say that this is the wave of the future and a growing gaming segment. Zynga is a leader in the mobile and social media space with its popular Farmville and Words with Friends games, and it generates 12% of Facebook's (FB) revenue and was nearing $1 billion in revenue in just four years.

But Zynga is looking more like a flameout than a FarmVille. The gamer is being sued by new shareholders who allege the company committed securities fraud by making misleading statements when it went public. Zynga substantially cut its bookings and earnings outlook shortly after the stock began trading. Zynga is also getting sued by Electronic Arts, which says Zynga copied key elements of The Sims Social.

If investors want to make a bet on a digital game company, they don't have to look much further than the existing ones. Activision has seized on the popularity of mobile games and will be developing an Angry Birds game with Rovio Entertainment. The hope is to capitalize on the successful mobile game. EA is making its move into mobile with its Nucleus platform, which has 225 million registered members. That isn't too far behind Zynga's 292 million active users.

Even GameStop (GME - Get Report) has jumped into the mobile space. GameStop is taking pre-orders for the Google (GOOG) Nexus 7 tablet and offering a 30% trade bonus towards the pre-order. So Zynga really doesn't have a lock on the mobile gaming space that some think it has.

For some inexplicable reason, the market has rewarded Zynga with a forward price-to-earnings ratio of 19.87. Activision and EA are both at roughly 10, while Take Two is dragging in at 3.47.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,654.49 -18.11 -0.10%
S&P 500 2,051.77 -0.05 -0.00%
NASDAQ 4,761.8680 +3.9890 0.08%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs