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Two Reasons to Avoid Zynga Inc (ZNGA), Two Companies to Buy

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The bounce in shares of Zynga Inc (NASDAQ:ZNGA) ( might be over. After paying an outrageous amount of money for a Microsoft executive and getting surpassed as the biggest game developer on Facebook Inc (NASDAQ:FB) by, it appears that investors might want to take profit in Zynga Inc (NASDAQ:ZNGA).


Zynga is up 45% in 2013:

ZNGA data by YCharts

Investor sentiment about Zynga Inc (NASDAQ:ZNGA) switched to bullish when the company said it hired Don Mattrick, a former Microsoft executive who was the boss for Xbox. The new CEO will be paid $5 million for the next 5 years, and the stock awards total $40 million. The total compensation will be $95 million, if all performance targets are met, though 8.9 million in restricted stock is not vested until July 2016.

No real change in leadership

The newly formed Executive Committee was approved by the board, according to the SEC filing on June 27, 2013. The committee, which is comprised of Mattrick and Pincus, Zynga’s founder, “will serve to manage the operations and affairs of the Company between Board meetings, and will report to the full Board.”

Dominance on Facebook lost

AppData reported that for the month ending July 6, 2013, Zynga lost its lead as the most popular game developer on Facebook to King.

# App Name Monthly Active Users
1 King 150,251,400
2 Zynga 147,687,743
3 Microsoft 71,418,060

Data Source: AppData

King is the maker of Candy Crush Saga, and is number one on Facebook. Zynga Inc (NASDAQ:ZNGA)’s FarmVille 2 is a distant 4th place, trailing Candy Crush by 14 million Monthly Average Users (MAUs):

# App Name MAU
1 Candy Crush Saga 45,541,052
2 TripAdvisor™ 40,269,431
3 Criminal Case 34,637,861
4 FarmVille 2 31,658,976

Data Source: AppData

Alternative investments

Investors taking profits in Zynga Inc (NASDAQ:ZNGA) might want to consider mobile game makers like Glu Mobile Inc. (NASDAQ:GLUU). Glu Mobile Inc. (NASDAQ:GLUU) rose 11% recently after investors speculated that the $17 million revenue guidance will prove to be beatable. 3 of Glu Mobile Inc. (NASDAQ:GLUU)’s games are on the top 30 list of iOS games in China.

ZNGA data by YCharts

In March, insider buying picked up. In fact, in the last 12 months, insider buying exceeded selling:

Type Last 12 Mo.
Total Shares Traded: 5,976,967
Number of Shares Bought: 3,338,127
Number of Shares Sold: 2,638,840


Bearishness is also very high. The short float is 25.1% as of June 14, 2013.

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