It’s been a super tough few months for Zynga and internal morale at the company. After Facebook’s lackluster IPO and the lock-up period for employees broke, Zynga shares have slipped more than 30 percent since May. Today could have been a reprieve for the company, which had its big semi-annual launch event today in San Francisco.
Shares were up early in the morning, but they dramatically sold off around 11:30 a.m. Pacific time by about 5 percent to $5.79. I’m not sure exactly why this happened — as no one can ever fully understand the logic (or illogic) of the market — but it was around the time that the company talked about casino games.
It’s possible that investors wanted something more certain about the future of Zynga’s online gambling and casino revenues. Several casino game developers have racked up venture rounds over the last six months on bets that state governments will relax regulations around online gambling to shore up their fiscal deficits. Zynga would be in a prime position to capitalize on this. The company recently launched Slots, which is now the 9th top grossing iOS game in the U.S. Jesse Janosov, who is the vice president and general manager of Zynga Casino, also showed off a new title called Zynga Elite Slots.
Zynga’s year-over-year revenue growth on Facebook as slowed as the platform has matured, so it needs to find a new way to fuel revenue growth, whether that’s on mobile platforms or through new genres like casino gaming. The new arcade titles like Bubble Safari could help. Analysts like Lazard’s Atul Bagga have argued that Zynga is oversold and could rebound on better monetization. He believes mobile titles may monetize at a much better rate than titles on the Facebook platform.
Zynga did make a number of announcements that are supportive of its earnings over the next six months. It showed off a Sims-like game called The Ville plus the next version of Farmville. Both are games, which if managed correctly, could be big breadwinners for the company.