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Zynga Remains Incredibly Cheap

Stocks in this article: ZNGA FB

NEW YORK (TheStreet) - Zynga (ZNGA) shareholders couldn't be happier after the company gave a welcomed surprise on Thursday. The company reported earnings early, and they were fantastic. The announcement came early to coincide with announcing the acquisition of NaturalMotion. NaturalMotion is a leading mobile game developer known for games that include CSR Racing and Cumbsy Ninja.

If you followed my buy recommendation on Real Money Pro, you're up over 20% in about 10 days. Shares are currently up 16% to $4.36.

WATCH: Zynga Buys Maker of Clumsy Ninja and CSR Racing in Mobile Push

Zynga will pay $391 million and approximately 39.8 million shares for a total consideration of about $550 million (using Friday's price at the time of writing). About 11.6 million shares are subject to a three-year vesting period. NaturalMotion is expected to be accretive in 2014 on a non-GAAP basis. I'm not a strong believer in non-GAAP numbers, but it does appear later in 2014 or by 2015, NaturalMotion will add forward income momentum.

NaturalMotion adds a new plateau of professional quality control in terms of customer experience. If Zynga's games were not addictive enough, NaturalMotion takes it to an entirely new level. After the purchase, Zynga remains incredibly cash rich at $1.2 billion. While the purchase is fantastic news, I'm more excited reading every key metric to profitability improved.

It's too early to know how much revenue Facebook's (FB) entry into U.K. poker will bring to Zynga as it only started this month. However, the partnership should add revenue and earnings starting with the first quarter 2014. More important, investors will gain significant insight on what to expect as both Zynga and Facebook expand into other markets. While significant, the U.K. market is a drop in the bucket compared to the rest of the world.

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