- The gaming company has managed to grow its mobile users sequentially in recent quarters, which is an encouraging sign.
- In the first quarter of 2014, Zynga's monthly audience went up by 10% whereas its daily audience saw growth of roughly 7% over the fourth quarter of 2013.
- Our current price estimate for Zynga stands at $3.33, implying a premium of about 10% to the market price.
Zynga's (NASDAQ:ZNGA) market valuation still remains subdued, and the company will need to do a lot more to convince investors. Our current price estimate for Zynga stands at $3.33, implying a premium of about 10% to the market price. This slight optimism stems from Zynga's recent efforts to enhance its presence on mobile devices. The gaming company has managed to grow its mobile users sequentially in recent quarters, which is an encouraging sign. In addition, it expects mobile bookings to surpass web bookings in 2014. Rather than the weakness in its social games on desktop, this is an indicator of its growing strength on mobile. Luckily for Zynga, Casino franchise continues to grow its user base. Unlike other social games, casino-related games have repeat value for users and are likely to do well in the long run.
Mobile Audience Is Growing
In the first quarter of 2014, Zynga's monthly audience went up by 10% whereas its daily audience saw growth of roughly 7% over the fourth quarter of 2013. This sequential increase was encouraging considering how the company has performed in the last one-and-a-half years. Mobile was at the forefront of this growth. Zynga's monthly mobile audience jumped 45% sequentially during the same period. The daily figure was up 23%. While much of this can be attributed to the acquisition of mobile gaming company NaturalMotion, core Zynga mobile users also saw double digit sequential growth.
Earlier this year, Zynga launched a new version of Farmville for the Apple (NASDAQ:AAPL) iPhone, iPad and Google (NASDAQ:GOOG) Play, which showcases its gradual efforts to revive its mobile gaming business. Several Internet giants have figured out the recipe for conducting their business successfully on mobile, and Zynga doesn't intend to fall behind. Although late to the party, its efforts are still in the right direction. Monetizing mobile is critical due to the continued shift of consumers to smartphones and tablets for most of their computing and entertainment needs. It was only after Facebook (NASDAQ:FB) started ramping up its mobile ad business that its market price shot up significantly. The same thing happened for Internet radio company Pandora Media (NYSE:P).
Zynga's acquisition of NaturalMotion has complemented its gaming roster by bringing successful games that appeal to genres of racing and people stimulation, areas where Zynga hasn't seen much success. However, Zynga's current mobile presence is still far behind one of its key competitors, King (NYSE:KING).
Mobile Bookings Expected To Surpass Web (Desktop) Bookings
Zynga expects its mobile bookings to account for more than 50% of its total bookings in 2014. For Q1 2014, the figure stood at 36%. If the company achieves this, it will join the ranks of other successful Internet firms that earn most of their revenues from mobile platform. Some of the franchises are doing good and have adapted well to the mobile platform. These include Casino franchise, which includes Zynga Poker, and Words With Friends franchise. The company continues to make investments in these franchises to promote and upgrade them and expand their audience.
The Casino franchise saw double-digit growth in bookings in Q1 2014 which can be attributed to the changes made to Zynga Poker and user adoption of Slots, Hit It Rich and Riches of Olympus. Mobile audience for Zynga Poker jumped 19% sequentially in the first quarter, whereas the figure for Words With Friends was slightly lower. If this success continues and Zynga manages to launch interesting expansions and upgrades, it can grow its mobile bookings significantly this year and achieve its target.
Disclosure: No positions