ZNGA Stock Forecast: Avoid Investing In Zynga, It Has More Downside Risks

Summary:

  • Zynga’s stock has a negative trend score from I Know First. Seeking Alpha’s Quant Rating for Zynga is Neutral.
  • It is therefore wise for us to avoid going long on ZNGA. If we heed the sell signal from I Know First, we can also short ZNGA.
  • The reason why Zynga warned of weaker Q3 and Q4 is because its regular players are now flocking to cryptocurrency-based Android/iOS games.
  • I will only rate Zynga’s stock as a buy again after it comes up with its own answer to Axie Infinity. Cryptocurrency games can offset Apple’s restrictive app privacy rules.
  • The play-to-earn cryptocurrency is the next growth driver for video games. NFT Gaming Tokens now touts combined market value of $13 billion.

I endorsed Zynga (ZNGA) as a buy-in on January 31, 2019. ZNGA’s stock price back then was only $4.78. Even after its -30.13% 6-month decline, ZNGA is still trading above $8.70. Long-termers who held on to their ZNGA should cash out their winnings. There are better gaming-related stocks out there that deserve your money. Zynga’s management has cut its full-year guidance earlier this month due to the headwind from Apple’s (AAPL) more restrictive app privacy rules.

(Source: Seeking Alpha Premium)

Like other game developers/publishers, a huge part of Zynga’s mobile advertising and in-app purchases revenue comes from iOS devices. The $307 million/year mobile advertising business of Zynga relies on gathering personal information from players of its mobile games. Unless it becomes a serious PC or console gaming publisher, Apple’s restrictive app privacy policy will persist as a headwind for Zynga.  

My sell rating for ZNGA is more decisive against the Neutral outlook that ZNGA got from Seeking Alpha’s Quant AI. The headwind of Apple is why I believe ZNGA will have a hard time climbing back to its 52-week high of $12.32. Mobile advertising platforms and game developers are likely to monetize less because Apple is encouraging its iOS device customers to opt-out of data-gathering activities of third-party app developers. Of course, Apple also offers its own mobile app advertising platform. We can presume that Apple wants more mobile ad buyers to use Apple’s own Search Ads platform so they can circumvent the restrictive app privacy settings.  

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Disclosure: This article originally appeared on Iknowfirst.com, a financial services firm that utilizes an advanced ...

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Dick Kaplan 2 weeks ago Member's comment

You do not consider these facts about #Zynga ($ZNGA):
1. Chartboost was purchased to go in house with over 700 million active users. This will cut expenses and work in favor of IDFA.
2. #Apple ($AAPL) and #Google ($GOOGL) have been caught with their pants down on the 30% cut on the App Store. Big win for gaming. South Korea first.
3. The Merge category has experienced competition and therefore Zynga needs to be much more aggressive with MD and MM.
4. Gram Games is paid off. No more contingency payments.
5. Zynga’s forecast was $2.8 billion and moved to 2.9$ billion after the first quarter. We are now at $2.85 billion.
6. Small Giants last contingency is in January. 4 months away.
7. Zynga said the 3rd quarter would send headwinds on IDFA and by the 4th quarter Chartboost will be in place.
8. Star Wars Hunter will be the first console game with CSR2 to follow.
9. Cash flow is strong and we just purchased in China. Short term we have a hiccup.

Long term, I think this company has huge growth.