Major Upside Ahead in Zynga Stock
In the past two years, Zynga Inc (NASDAQ:ZNGA) stock has been trading deep in the doldrums. It went downhill since March 2012 and never really managed to make a comeback. But now, there is something that could turn into a major catalyst for Zynga stock.
Let me explain…
On Thursday, June 30, Zynga released the much-anticipated “CSR Racing 2” for “iOS” and “Android.” This is the sequel to the highly successful CSR franchise, whose “CSR Racing” and “CSR Classics” have been downloaded by more than 190 million players worldwide. (Source: “NaturalMotion’s CSR Racing 2 Now Available Worldwide,” Zynga’s Official Blog, June 30, 2016.)
The game is developed by NaturalMotion, a British software company that was bought by Zynga in 2014. CSR Racing 2 is NaturalMotion’s first release since being acquired.
Zynga and NaturalMotion have put a ton of efforts into developing this game, and the result does not disappoint. CSR Racing 2 received a 4.5-star rating (out of five stars) in both the iOS “App Store” and the “Google Play” store. GameZebo’s review of CSR Racing 2 said that the game “was worth the wait.” (Source: “CSR Racing 2 Review: Revved Up Again,” GameZebo, June 30, 2016.)
The most impressive part of the game is its graphics. To many people, Zynga is known for social games like “FarmVille” and “Words With Friends.” But this time, with the expertise from NaturalMotion, Zynga delivered “beyond console” graphics. (Source: “CSR Racing 2 and Its ‘Beyond Console’ Graphics Launch on iOS and Android,” Venture Beat, June 30, 2016.)
In a recent interview, NaturalMotion’s chief executive officer, Torsten Reil, said that the new game is “using the full resolution of the iPad Pro [2,732-by-2,048 for the 12.9 inch model he demoed on], obviously much more than HD, much, much higher resolution, running at full 30 framerate.” (Source: Ibid.)
He noted that neither “PlayStation 4” nor “Xbox One” can output these resolutions. Moreover, the attention to detail is on a whole new level. The company even has a paint expert to make sure the paint looks correct on the cars in the game.
“If you look at the reflections on the cars, we spent a huge amount of time trying to get those right. We have different shaders for every single part of this car,” said Reil. (Source: Ibid.)
Why did the company bother with these details? Well, obviously it improves the gaming experience. But at the same time, Zynga is trying to create a feeling of actually owning the cars in the game.
“You want to feel what it’s like to race a car like this,” said Reil. “But you also want to feel what it’s like to own a car. A lot of this is about car ownership, not just the racing itself.” (Source: Ibid.)
Of course, what Zynga stock investors really want to know is how this game might improve the company’s financials. At first glance, you might feel a bit disappointed because the game is actually free to download from both iOS and Android app stores.
But free-to-play might actually be the best way to do it. In the mobile app industry these days, it’s all about getting users in the door first and then selling them value-added services.
This is indeed what Zynga is doing right now. The company doesn’t charge a penny when users download the game, but once they start playing, there will be plenty of opportunities for the company to offer users in-app purchases. Users also get an offer to watch an ad for some free currency in the game. Once Zynga has its users, it will have a variety of ways to monetize.
In fact, the strategy worked great with the previous version of CSR Racing. Back in 2012, the free-to-play game was amassing $12.0 million per month in the iOS App Store. (Source: “Free-to-play iPhone Game ‘CSR Racing’ Is earnings $12 Million per Month,” The Verge, August 15, 2012.)
The Bottom Line on ZNGA Stock
Given that the new version keeps all the quality ingredients of the old one and improves the gaming experience significantly, it has a good chance of becoming a huge hit. Zynga stock lost its appeal because the products that brought the company to the center stage are no longer popular. With CSR Racing 2, the company could see material improvements in its financials, which should provide some serious upside in ZNGA stock.