logo
  Join        Login             Stock Quote

Betting On Zynga, Inc. (ZNGA) May Payoff Bigger And Sooner Than Expected

 April 03, 2013 02:57 PM


(By Rich Bieglmeier) Zynga, Inc. (ZNGA) is rolling sevens this morning on news that the online game company unleashed two" real-money" casino games in the U.K. , where online gambling is legal, unlike the USA. 

The one-time high-flyer released "ZyngaPlusPoker" and "ZyngaPlusCasino" for gamblers to try their luck in the U.K.  Analysts' aren't so hot on the deal. Jefferies & Co. analyst Brian Pitz thinks "The near-term financial impact will be low." However, he sees a much larger opportunity when/if online gambling is legalized in the U.S. considering the company's relationship with Facebook (FB). 

Although the move into online U.K. gambling might not be the elixir that cures ZNGA's falling Farmville blues, iStock thinks the USA is ZNGA's intended target. It's our opinion that the current versions of "ZyngaPlusPoker" and "ZyngaPlusCasino" will be used to work out the "bugs" so the games will be ready for prime-time when online gambling in the US is re-legalized. 

[Related -Zynga Inc. (ZNGA) Q2 Earnings Preview: Shareholders Hoping for Bad Data]

It might not be as far away as you think. 

In February 2013, Nevada Governor, Brian Sandoval signed Assembly Bill 114 into law. The new law allows Nevada to enter into compacts with states to offer internet poker, and other online gambling to patrons in Nevada and participating states. 

iStock is surprised that it took so long for a "Gaming" state to bring such a bill into law. The Justice Department changed its mind regarding online gambling way back in December 2011. 

[Related -Candy Crush: About to Crush Investors?]

"The Department's Office of Legal Counsel ("OLC") has analyzed the scope of the Wire Act, 18 U.S.c  § 1084, and concluded that it is limited only to sports betting," is the department's new position. In other words, online poker and casino games will get no static from the nation's chief law enforcement agency. 

This new, old ruling makes online gambling compacts between states highly likely. Besides Nevada, other states currently considering online gambling for their residents include Delaware, California, Hawaii, Illinois, Iowa, Massachusetts and Mississippi. 

Despite being "illegal" since 2006, an estimated 10 million Americans still wager online, spending an estimated $4 to $6 billion annually. Do you actually think the government at any level is going to continue letting that money, via taxes, continue to walk out the door?  Neither do we. 

We believe at least one of the aforementioned states will offer poker and casino games before the calendar flips to 2014. Once the door is opened, the stampede of other states will head for the door, and iStock can see as many as 12 states (maybe more) legalizing online gaming within the next 18-24 months. 

Overall: Looking at Zynga, Inc's. (ZNGA) entrance into the competitive U.K. online gaming industry as a standalone event is shortsighted in our view. We have very little doubt that legal online gaming in the US will be coming to a state near you, and probably sooner that you think. If so, Zynga could stand to benefit more than most.

iOnTheMarket Premium
Advertisement

Advertisement


Post Comment -- Login is required to post message
Name:  
Alert for new comments:
Your email:
Your Website:
Title:
Comments:
 

rss feed

Latest Stories

article imageA Lesson For the Bears From 2007

Bears almost never get a top where they want it. During 2007, the S&P 500 fell below its 200-day moving read on...

article imageGoogle: Still Opportunities Ahead

Google (GOOGL) shares are finally recovering after announcing third-quarter earnings last week that were read on...

article imageThis Technical Indicator May Be The Simplest Way To Pick Winning Stocks

What's the first rule of successful real estate investing? Of course, you just said to yourself, "location, read on...

article imageUpdate On Crude Oil Markets

Crude prices came under pressure again today. According to Reuters (from last week), the Saudis “will read on...

Advertisement
Popular Articles

Advertisement
Daily Sector Scan
Partner Center



Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.