Current Zynga threats
Zynga might have tricked many Electronic Arts Inc. (NASDAQ:EA) employees to defect, but Electronic Arts looks to be having the last laugh. Both companies know that mobile exposure is essential, yet only Electronic Arts Inc. (NASDAQ:EA) has made a significant splash. It currently offers titles like Bejeweled, Madden, The Sims, Tetris, and much more. Additionally, it plans on adding 15 titles in 2014.
Zynga offers Words With Friends, Draw Something, FarmVille Express, and much more; however, Zynga Inc (NASDAQ:ZNGA)’s transition to mobile hasn’t been smooth due to late arrival, a lack of innovative titles, and costs.
Electronic Arts Inc. (NASDAQ:EA) is winning the mobile battle, but considering it’s currently trading at 72 times earnings, it would be a high-risk investment.
On another front, International Game Technology (NYSE:IGT) owns DoubleDown, the largest virtual casino in the world. International Gaming acquired DoubleDown early last year for $500 million. Many investors are still irate about the price paid, stating it was way too high. Some high-priority investors have lobbied for International Game Technology (NYSE:IGT) to refocus on designing casino games for casinos. Despite International Game Technology (NYSE:IGT) shareholders being dissatisfied, if real-money poker takes off in the United States, then Zynga will have yet another competitor to worry about.
For those of you considering International Gaming as an investment, it has had its ups and downs through the years. But it’s always been profitable, and it currently yields 2.20%. It could be a better way to play the online real-money gaming boom (if it takes place) than Zynga, but it’s still too early. Further, International Gaming has high leverage and is susceptible to broader market fluctuations, so the stock could suffer.
Conclusion
Electronic Arts is too expensive and IGT is too leveraged. This doesn’t look to be the ideal time to invest in either company, but they’re both likely to be long-term winners. Zynga Inc (NASDAQ:ZNGA), on the other hand, is a lottery ticket. Currently, risks greatly outweigh rewards. Perhaps a new leader with direction and an innovative spirit would serve the company well.
The article Zynga’s Flaws, Threats, and Potential originally appeared on Fool.com and is written by Dan Moskowitz.
Dan Moskowitz has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Dan is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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