ZNGA Stock: Is This the End of Zynga Inc?

ZNGA StockIt’s okay if you aren’t playing FarmVille anymore, because nobody is. In fact, the problem of declining user numbers has sent Zynga Inc (NASDAQ:ZNGA) stock to penny stock levels. Four years ago, ZNGA stock was trading at more than $14.00 a share. Today, it’s just above $2.30. So, is it over for the online game developer?

Not really.

Will This Turn ZNGA Stock Around?

You see, the main reason behind Zynga’s downfall is obvious—the company’s games are no longer popular. Zynga was known as the company behind FarmVille—one of the hottest online games a few years ago. Today, the new installment, FarmVille 2: Country Escape, is nowhere near the top in the app store. Among all “Android” apps, the game is ranked 54th. (Source: “Top Grossing Android Apps,” Google Play, last accessed March 2, 2016.)

But note that while the FarmVille series struggled, the company has other games that are producing solid results. Among them, Slots, Words with Friends, and Poker formed Zynga’s core live mobile franchises and their bookings grew 63% in 2015. (Source: “Zynga Announces Fourth Quarter and 2015 Financial Results,” Zynga Inc, February 10, 2016.)

Zynga admits that the overall decline in its audience was due to “the lack of significant new releases.” To address the issue, the company is launching 10 new games in 2016. Moreover, it will stick with what works: among the 10 games, four will fall into the “social casino” category.

Other than launching a significant number of new products, the company is making another major move—selling its San Francisco headquarters building.

According to Bay Area real estate blog The Registry, Zynga is putting its headquarters office property on the market for sale. (Source: “Zynga to Put Headquarters Building in San Francisco on the Market,” The Registry, February 23, 2016.)

The company bought the 670,000-square-foot property for $228 million back in 2012; that’s approximately $340.00 per square foot. With property prices having skyrocketed in San Francisco since then, one square foot of office space would cost more than $800.00 today. This means Zynga’s building could command a price tag of $536 million—a gain of $308 million!

The Bottom Line on ZNGA Stock

Most recently, the company announced the appointment of a new CEO and that cheered up investors. Frank Gibeau, the new CEO, has been on Zynga’s board since last August and had spent more than 20 years at Electronic Arts Inc. (NASDAQ:EA). After the announcement, ZNGA stock shares climbed more than five percent in afterhours trading.

Proceeds from the office building sale would give the company a lot more breathing room. Moreover, some of Zynga’s upcoming games might just be the next big hit. While there will still be uncertainty going forward, ZNGA stock is not over yet.