Zynga has a great business, but the social gaming business for the time being is not really producing much profit for the company. I don't doubt that in the future, as social gaming evolves and becomes more mature the company will do better.
In the mean time, however, there is little in terms of news that can excite investors about the stock, except for the fact that the company will be entering the real money gaming space. And like I said many times (my Zynga logic here), while I like social gaming, the big money will come from real money gambling.
Zynga didn't tell us anything we don't already know at the Goldman Sachs Technology Conference. However, the company did give us some clues that are very important to investors.
As per the partnership between Zynga and bwin, Zynga essentially said this was an exploratory opportunity and that it was doing it to explore the possibilities and to learn from this business. In other words, this partnership is more of a learning experience.
As I understand, it's more of a long-term strategic play than anything else. In other words, they don't really expect to make much money from it for now. I assume it is hoping to make money, but it's not something it is really counting on.
As per the Nevada gaming license the company has applied for, Zynga said it is simply positioning itself for legislation that would permit online gambling in the future, but it is not expecting any revenue from this activity anytime soon. In fact, it does not expect anything to happen for all of 2014!
OK, so if the company is not expecting to begin gambling operations in the U.S. in 2014, that means that the earliest we can expect something from it is 2015.
Also, as far as the partnership with bwin, like I said before, the earliest date that we can expect any kind of surprise will be Q3. But from the looks of things, I think we have to wait for Q4 of 2013 (at the earliest) to get a better picture.
Basically what all this means is that there is no reason to expect we will be surprised by Zynga anytime soon. And if I am correct - that the market is not expecting a surprise - there is no reason to run up the stock for now.
So I am reiterating my thesis on the stock, which is, in order for Zynga to go above its current resistance level of $3.41, it must surprise us.
But a surprise can only happen with rock solid tangible news, either something to do with real money gambling or an earnings surprise from the company's ongoing operations.
So until further notice, I don't see much upside to the stock, unless of course something extraordinary happens and the company surprises us in some way.
So for long-term investors, my recommendation is do nothing and hold onto the stock, because eventually I think this company will do great.
For short-term players, even though I think there is really no reason for the stock to run up from this point at this time, if you see the stock trending above $3.41, then the stock is a buy.