3 Web 2.0 Companies That Are Buys: Zynga Inc (ZNGA) and More

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Zynga Inc (NASDAQ:ZNGA)

Zynga recently reported strong 4Q results that were ahead of consensus both from the topline and bottomline perspective. Zynga is making its strategy more focused by reducing the number of games in development and concentrating on fewer games with better financial prospects. This strategy will likely help the company’s return on investments in the future. Zynga also remains on track to launch real-money poker and casino games in UK in first half of this year which will be a positive for the company. Recent news regarding possible legalization of online gambling in some of the US states is also a positive for Zynga. The company has $2 per share worth of cash and real estate assets on its books that are likely to provide a strong downside support to the stock. On the other hand, any positives from online gambling, Zynga.com platform, strong mobile growth, and new games can lead to substantial upside in the stock price. Thus, risk reward profile for the stock is skewed towards the positive side.

Foolish Conclusion

To sum it up, increasing mobile revenues and growing importance of “social” context in online advertising makes me bullish on Facebook. Groupon is a good investment given increasing migration of local commerce to online channels. Zynga’s strong asset base provides a good downside support while there are several catalysts on the upside like online gambling, Zynga.com platform, new games launch etc. which makes me bullish on the company.

The article 3 Web 2.0 Companies That Are Buys originally appeared on Fool.com and is written by Ash Sharma.

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