The uptrend seems to have gathered even more momentum after the court ruling. It continues to make new 52 week highs and the volumes have been very good. The Jury found that the company had not infringed on the patents of Personalized Media Communications in its game titles. This helped it avoid royalty payments of around $25 million, and will deter others from filing similar suits. The last one year has seen the stock appreciate 85%, though it is still trading at a fraction of its value in March 2012. Nothing much has changed fundamentally, as the company continues to carry a net loss on a ttm basis. There has been reduction in net loss in a couple of quarters, but the trend is not in place yet. In addition, even the topline has started to decline consistently. The company did better than analyst estimates in the last quarter, and was cash flow breakeven. The improvements are good, but more such signs are required to confirm that a trend is in place. The competition is immense with existing players like Electronic Arts (EA) and Activision (ATVI), and new entrants like MGT Capital Investments (MGT) attempting to attract users through novel creations & strategies. Cash position of Zynga is very good and it has no debt. That reduces the investment risk. The stock is surely on an uptrend, and the momentum cannot be ignored. Investors have high hopes from the new CEO due to his successful track record in the industry. The social mobile games industry is still young and hence the growth may be robust. Zynga can leverage the growth to revive the falling topline. However, it needs to keep the costs under control so that it achieves the much needed profitability on a net basis.
