Should You Buy Zynga Inc (ZNGA) After Its 11% Drop?

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After all, even if additional states continue to pass legislation legalizing online gambling, you can bet Zynga Inc (NASDAQ:ZNGA)will face intense competition from other well-funded competitors. Michael also noted there’s a chance recent rumors of a Zynga partnership with Wynn Resorts, Limited (NASDAQ:WYNN) could turn out to be true.

Wynn, for its part, certainly wouldn’t mind another source of revenue; while the company did find some growth last quarter thanks in part to its Cotai operations in Macau, that growth still didn’t keep pace with Macau as a whole. As a result, Wynn’s overall sales managed to rise just 4.9% from the same year-ago period.

Even still, unlike Zynga, Wynn remains solidly profitable and doesn’t need to lean on an unproven online presence nearly as bad as Zynga needs a partner to share the risk. In addition, as Zynga’s dissolving relationship with Facebook Inc (NASDAQ:FB) proves, there’s still plenty of risk involved with Zynga Inc (NASDAQ:ZNGA) relying too much on other companies to ensure its own survival.

Foolish final thoughts
Finally, Zynga is no stranger to experiencing painful brain drains, and I suspect this latest round of layoffs will likely result in a fresh exodus of top talent to other gaming firms like Electronic Arts Inc. (NASDAQ:EA) or the ridiculously profitable Activision Blizzard, Inc. (NASDAQ:ATVI).

In the end, despite all its cash, I’m afraid Zynga Inc (NASDAQ:ZNGA) is still too risky for my taste. Until its online gambing efforts bear some tangible fruit, these “substantial cost reductions” may only be delaying the inevitable as Zynga extends its vicious downward spiral.

The article Should You Buy Zynga After Its 11% Drop? originally appeared on Fool.com.

Fool contributor Steve Symington has no position in any stocks mentioned. The Motley Fool recommends Activision Blizzard and Facebook. The Motley Fool owns shares of Activision Blizzard and Facebook.

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