Call Options Or Put Options On Zynga (ZNGA)?
Zynga (ZNGA) develops online social games on the Internet as well as games for mobile platforms. The company has created such popular titles as FarmVille, CityVille, Zynga Poker, Words With Friends, Draw Something, and more.
ZNGA is currently trading for $3.27. The stock’s up 39% year-to-date after a 19% increase over the past week. The shares are up 56% off the 52-week low of $2.09 and are down 42% from the 52-week high of $5.61.
Is this an opportunity to buy call options on ZNGA with the company bringing Microsoft’s (MSFT) Don Mattrick on as CEO? Or should you buy put options on ZNGA because of the company’s continued growth struggles?
The bulls make a convincing argument…
ZNGA has never had trouble generating popular games or generating revenue. Its problem has been creating sustained growth.
New CEO Don Mattrick is a gaming industry veteran. During his six years at Microsoft, he oversaw 700% expansion of the Xbox 360 – making it the most popular gaming console. Plus, he worked at Electronic Arts (EA) where he helped create the huge “Sims” franchise.
Zynga has needed a new perspective for some time, and Mattrick brings it. Not to mention, he has a proven track record. Shareholders are excited about what the new CEO can do with ZNGA’s historically impressive hype machine.
But the bears have a compelling case as well…
ZNGA has been losing subscribers at an alarming rate. In the most recent quarter, daily active users dropped 20% to 52 million. That’s a huge percentage of users – especially when active users are vital for revenue generation.
What’s more, competition has intensified in the mobile and Internet gaming spaces. There are well-funded software developers around every corner. ZNGA’s buzz machine may not have the impact it once had.
Finally, even the best CEOs take time to turn a company around. And Zynga still has a lot of work ahead of it.
Is ZNGA’s new CEO enough to counter its shrinking customer base?
If you think the bulls are right, take a look at buying the ZNGA August $3.00 calls for around $0.45.
If you think the bears are right, take a look at buying the ZNGA August $3.00 puts for around $0.20.
Yours in Profit,
Gordon Lewis
Category: Call Or Put Options?
