Las Vegas Sands Corp. (LVS), Zynga Inc (ZNGA): Are These Companies Worth Gambling Upon?

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Will online gambling work?

International and domestic gambling has been helping the two casino companies grow their bottom line. Zynga Inc (NASDAQ:ZNGA) has officially entered the gambling industry in the United Kingdom with its two new games – RealPokerPlus and RealCasinoPlus.

The company suffered and earnings declined last year. In 2012, the company grew revenue 12% to $1.28 billion. However, its losses were $209 million. A positive for Zynga Inc (NASDAQ:ZNGA) was an increase in its advertising revenue to $137 million.

Zynga Inc (NASDAQ:ZNGA) makes money in two ways. The first is by charging game users for aspects of playing its games. One of its most popular games, FarmVille, charges users for upgrades and additional features. For any game that is played via Facebook Inc (NASDAQ:FB), Zynga has to pay a portion of its revenue to Facebook Inc (NASDAQ:FB) in fees. It has roughly 2.9 million paying users.

The other way Zynga Inc (NASDAQ:ZNGA) monetizes its users is by selling advertisement in its games. This has grown drastically, while paying users have slipped 2%.

The entrance to online gambling is a positive sign for the company as it attempts to find new revenue streams. It will be sharing a portion of its revenue with the U.K. gaming site bwin. There are only three states in the United States that allow online gambling. Unless more states adopt online gambling, this move won’t mean much for Zynga Inc (NASDAQ:ZNGA).

Final thoughts

If you are going to do any betting, bet on a good gambling stock. Gambling companies are starting to see some recovery as consumer spending rises. Las Vegas may see a comeback, but Macau is bringing in the profits for sure. Zynga Inc (NASDAQ:ZNGA) is trying to diversify its business and find new ways to delight its investors. Unfortunately, this is not the best way to go. Online gambling won’t expand far enough to turn a huge profit. Stick with Las Vegas Sands and Wynn Resorts as your gambling stocks.

The article Are These Companies Worth Gambling Upon? originally appeared on Fool.com.

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