Here are my reasons to support my long position
The stock is undervalued as it stands today without even considering anything in the future. Zynga has $1.3 billion in cash and equivalents i.e. 65% of market capitalization or $1.7 per share. After today, Zynga is essentially trading for $1.4 per share, if we discount the cash. If we take into account that company's operations are still generating quarterly cash flows, of around $25 million and FCF in the range of $40 million.
Zynga cut 18% of workforce and it was all the employees who were no longer needed because they weren't valuable to the transition to mobile gaming and online gambling. This saved Zynga $80 million.
Legalization of online gambling:
Regulated real-money Internet gambling reached a nearly $30 billion market worldwide in 2012, according to H2 Gambling Capital.
The U.S. gambling market is estimated to be $380 billion, of which only $3 billion is legalized at this time.
Zynga was able to get people to buy virtual farm animals; they will get a BIG piece of that $380 billion.
H2 Gambling Capital forecasts that by 2017 the U.S. market could hit $7.4 billion, based on recent legislation passed in several states that support online gambling.
Zynga Poker is the largest poker site in the world with 38 million users. The next largest is only half of that.
Gambling on mobile platforms, casino-type games in general are growing. Such games landed in the top three genres for revenue worldwide in 2012, for both Apple's iOS and Google's play.
Lastly, but VERY importantly, the new CEO chose Zynga over Microsoft and EA. CEO’s typically receive a substantial amount of income based on their performance. These talks were over months and he went through the company’s financials, business models, vision, and all kinds of important information that people normally don’t have access too, and picked Zynga.
