Zynga Inc (NASDAQ:ZNGA) could shed some light on social gaming and online gambling
After dropping precipitously from its IPO price, Zynga Inc (NASDAQ:ZNGA) is now trading well below $5. Yet, a number of analysts — including those at Bank of America — are bullish on the stock.
The popularity of Zynga Inc (NASDAQ:ZNGA)’s bread and butter market — social gaming — has declined in recent months, with Electronic Arts Inc. (NASDAQ:EA) announcing that it would pull the plug on three of its Facebook Inc (NASDAQ:FB) games earlier this week.
Does Electronic Arts Inc. (NASDAQ:EA)’s decision foreshadow a growing trend, or is it specific to that company? Zynga Inc (NASDAQ:ZNGA)’s results should shed some light on the continued profitably of social gaming, which could have an effect on shares of Facebook Inc (NASDAQ:FB).
Further, Zynga Inc (NASDAQ:ZNGA) has recently taken some aggressive action towards becoming a player in online gambling. Although only three states have legalized the practice, more could follow. Many investors, including hedge fund titan John Paulson, are betting on the future legalization of online gambling in US, either through Zynga shares or another company like Caesars Entertainment Corp (NASDAQ:CZR).
Whatever Zynga Inc (NASDAQ:ZNGA)’s management has to say about online gambling could affect that entire sector.
Coinstar, Inc. (NASDAQ:CSTR) and Deckers Outdoor Corp (NASDAQ:DECK) are heavily shorted
The last two companies aren’t particularly interesting from a broad market perspective, but could present profitable short-term trading opportunities.
Both Coinstar, Inc. (NASDAQ:CSTR) and Deckers Outdoor Corp (NASDAQ:DECK) are heavily shorted, with roughly 48% and 35% of their shares sold short, respectively. If either company posts a solid earnings report, shares could surge as short sellers are forced to cover their positions.
In the case of Coinstar, bears are banking on the coming decline of its Redbox business — consumers are increasingly forgoing DVDs in favor of digital downloads. Famed short seller Jim Chanos has publicly called Coinstar a great short, alleging that its Redbox business makes it a value trap.
Deckers Outdoor, on the other hand, is primarily a specialty footwear company, known mostly for its UGG boots. Like Crocs before it, short sellers are probably expecting a dramatic decline in the popularity of UGGs, as changing fashion styles could destroy the company’s business.
Both companies report Thursday, and could be some of the biggest movers in the after-hours session.
The importance of earnings season
Earnings season is vitally important, as earnings remain the long-term driver behind stock prices. Investors should always follow the earnings results of any company they happened to be involved in. But for companies they aren’t invested in, such a tremendous amount of information is difficult to follow. However, the five stocks I’ve identified are worth paying attention to, at least for next week.
The article These Are the Most Interesting Earnings Releases Next Week originally appeared on Fool.com and is written by Salvatore “Sam” Mattera.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
