Zynga Inc (ZNGA), Electronic Arts Inc. (EA): Is This Stock Worth a Gamble?

Electronic Arts Inc. (NASDAQ:EA) generated revenue of $495 million, but let’s just focus on the company’s mobile business as it is the only segment which can threaten Zynga Inc (NASDAQ:ZNGA)’s sales. The company’s revenue in the segment increased 30% to $103 million. The stellar performances of games like The Simpsons: Tapped Out and Real Racing 3 amplified Electronic Arts Inc. (NASDAQ:EA)’ margins.

Electronic Arts Inc. (NASDAQ:EA) is looking to make the most out of the exponential rise of the smartphone and tablet market by putting extra emphasis on developing mobile games. The expected launch of Plants v/s Zombies 2 has created great excitement among customers. The hype surrounding the game is huge, and it will certainly improve Electronic Arts Inc. (NASDAQ:EA)’ mobile business.

However, the company’s reluctance to introduce blockbuster games, like FIFA 13, on Android-based devices may have a negative impact on its sales in the future.

Apart from Electronic Arts Inc. (NASDAQ:EA), another company which poses a threat to Zygna is Glu Mobile Inc. (NASDAQ:GLUU). In the past, Glu Mobile Inc. (NASDAQ:GLUU) has kept many people glued to their screens with its exhilarating games. Glu Mobile Inc. (NASDAQ:GLUU)’s quarterly results were not great, as the company generated revenue of $17 million and posted a net loss of $2.3 million. Personally, I think the enforced in-app purchases have taken the fun out of Glu’s games leading to a decline in the number of active users.

To offset this loss, Glu Mobile Inc. (NASDAQ:GLUU) is looking to cut down on its operational expenses and launch a couple of new titles in the future. The company’s operational expenses in the first quarter were $19.3 million, signifying a dip of $1.4 million compared to the previous year.

The expected launch of games like Tons of Guns and Mobsters and Gangsters will definitely boost the company’s sales. Glu Mobile Inc. (NASDAQ:GLUU) is, however, delaying the launch of these titles, which may have a negative impact on the next quarter’s revenue. But it doesn’t matter as the company is focused on achieving its goal of long-term success.

Final remarks

Keeping the above facts in mind, I won’t consider Zygna a laudable investment, unless the company is able to excite the market place with its upcoming games. The waning popularity of Zygna’s older games and the presence of robust competitors will prevent the company from showing a good value in the future.

Ayush Singh has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Ayush is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article Is This Stock Worth a Gamble? originally appeared on Fool.com is written by Ayush Singh.

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