What’s Going to Save Zynga Inc (ZNGA) Now?

International Game Technology (NYSE:IGT) competitor Bally Technologies Inc. (NYSE:BYI), the maker of the Cash Wizard Tiki Magic and Pawn Star machines, is growing via acquisition as well. Weeks ago, it announced its plans to acquire industry peer SHFL entertainment Inc (NASDAQ:SHFL) in a $1.3 billion deal that will expand its product portfolio and also strengthen its position in Australia and Asia.

Based on the equity portion of the deal, Bally Technologies Inc. (NYSE:BYI) is paying some 16 times EBITDA, which is about double the industry average, according to a Bloomberg report. The addition is expected to be accretive to diluted earnings per share and free cash flow in the first year following the close of the deal.

Bally Technologies Inc. (NYSE:BYI) reports its financial results in mid-August. In its fiscal third quarter, the company generated a 28% increase in earnings while Shuffle Master had a record-breaking quarter where profits climbed 22%.

Next year, Bally Technologies Inc. (NYSE:BYI) expects to earn between $3.70 to $4.05 excluding the acquisition’s impact. This compares to analyst estimates of about $3.84, according to Bloomberg.  Now might be a good time to get in Bally’s stock, despite its higher than industry average earnings multiple of 22.5. The deal can add between $0.30 to $0.40 in earnings by 2015, according to Sterne Agee and Leach analyst David Bain.

Conclusion

The gaming industry is an industry that’s changing before investors’ eyes, and that makes it a potentially rewarding place to be. After all, not all industries are on the cusp of such dramatic growth given the change in online gaming as Internet gambling becomes regulated. Of the three stocks, Zynga Inc (NASDAQ:ZNGA) is clearly struggling, but you’d be making a good bet with International Game Technology (NYSE:IGT) or Bally Technologies Inc. (NYSE:BYI).

The article What’s Going to Save Zynga Now? originally appeared on Fool.com and is written by Gerelyn Terzo.

Gerelyn Terzo has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Gerelyn is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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