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Yesterday, Gambling911.com reported on how Zynga was already in the process of negotiating “real money” platforms for its uber popular Texas Hold’em online poker game. On Wednesday (July 25, 2012), the company is set to report earnings.
Last week, Zynga founder Mark Pincus confirmed the social media firm was exploring “real money” online poker ventures. On Monday, word spread like wildfire that GTECH G2 and Playtech had confirmed submission of bids.
In recent months, rumors of Wynn Resorts interest in joining forces with Zynga began to emerge. Wynn had previously entertained a short-lived partnership with the world’s largest “real money” online poker room, PokerStars, just weeks before the US Government named that firm in a complaint alleging its founder had engaged in money laundering and bank fraud.
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Rocco Pendola of TheStreet.com offered up even more reasons to be optimistic about Zynga:
The stock bucked a decidedly bearish trend to blow past the psychologically important $5 mark. Zynga reports earnings on Wednesday. If it beats, raises guidance or shows its hand a bit more with regards to online gambling, a move into double digits in short order is not out of the question.
As I explained in the above-cited article, Zynga has several strong constants -- no debt, massive revenue and a first-mover advantage -- as well as many potential catalysts that could burn traders and investors with short positions in the stock. There's no question that short covering fueled a good bit of Monday's move past $5.
Pendola does make it clear that this stock remains “volatile”.
An earnings miss or lowered guidance could send the shares reeling to new all-time lows.
And Pendola is not alone in his assessment of Zynga as a stock to watch closely.
John Shinal of the Wall Street Journal has repeatedly warned about jumping on Zynga. He is changing his tune these days.
Now, with Zynga’s stock trading for less than four times expected 2012 revenue, and IPO lockup expirations starting to balance out supply and demand, it’s easier to consider a bullish case for the shares ahead of the company’s Wednesday earnings report.
- Aaron Goldstein, Gambling911.com
