Analysts just like a vast majority of traders are reactive rather than proactive. This does not bode well for your portfolio or mine. Over the trading day today, Zynga has been beaten, mutilated, with no regard to its true potential. I had thought over the past week that the suffering had come to a halt, that possibly the end was near. Instead, more have capitulated, more have ran, the price has continued to decline on huge volume. Today the masses have left in exodus due to a negative research note. This note merely supported my earlier thesis stated this year, that Zynga was set up to own the mobile space, and profit handsomely from it.
As I have mentioned in my previous research notes (Assuming Social Media and Mobile Are Dead and Looking Past The Facebook IPO At The Future Of Zynga), which may be more vetted then the piece published today, Zynga has set themselves up to capture the whole of mobile. Zynga has taken the door Facebook has opened for them, profited from it, and has now opened the door of mobile. Why in the world would Zynga buy OMGPOP? Well the masses believe it was to throw away a few hundred million. Those with a little common sense can see it was to become a more dominant force in the mobile community. You think that if the Facebook gaming community was declining Zynga wouldn’t know about this, wouldn’t have made plans to profit elsewhere? Really? Contrary to popular belief Zynga desires to be profitable and make money for themselves, as well as shareholders. They have been setting themselves up for quite sometime to capture the mobile platform, along with the Facebook, Google play, internet, and soon to be iTV platform. As the rest of the year plays out, as we see many potential sellers turn into investors due to the dramatic price decline, things will get better, if not great for Zynga.
Of course when many around you, including those in the know, suggest a stock is headed towards $0.00 it is easy to capitulate. It is easy to suggest that death is near and that the company has no future. Well more often than not the right trade is never easy, just ask those who bought Yelp at $15.00 last week. Just ask those who bought Zillow at $20 last year when it was headed towards the abyss. Social media will be profitable, especially with the push from investors to monetize mobile. Facebook will monetize, succeed handsomely, and social media will be a darling once again. If you fear that social media isn’t the future, just buy Apple, oh wait isn’t that tied to mobile? That’s right the tech darling of the industry is betting on mobile as well, so I will continue to bet on mobile, elsewhere, where the returns are greater. Mobile is the future, Zynga has been and will continue to be positioned for this. The social media premium has long left us, but it will return. The growth is obvious in the mobile area and as I said in the past, Zynga is set up to profit from many platforms, many cell manufactures, be that of Google, Apple, or the next big thing.
Zynga is about to pull an OJ.. be prepared.
Photo by Marc van der Chijs