Will Zynga Be Saved By Real-Money Games?

  Google+  Twitter | + More Articles
  • Like on Facebook
  • Share on Google+
  • Share on LinkedIn

The massive success that companies like PokerStars had pre-2011, when the federal government all but exiled online real-money gambling, proves that there could be a place for Zynga Poker in the real-money market. But as some observers point out, the success of PokerStars is also a barrier to entry. PokerStars has a strong reputation among the poker-playing elites in America and if faced with a choice, it’s hard to see serious players picking Zynga.

The struggling social game developer will also face competition from established players in the poker industry like MGM Resorts International (NYSE:MGM) and Caesars Entertainment (NASDAQ:CZR). Both companies posted substantial gains on Thursday alongside Zynga’s short rally, but Caeser’s actually has a good reason to celebrate. The company’s stock surged over 14 percent because on Wednesday the Nevada Gaming Control board tentatively approved the company’s poker website.

CHEAT SHEET Analysis: Trends Support the Industry, but Not the Company

One of the core components of our CHEAT SHEET investing framework explains that companies riding macro trends tend to outperform those that don’t. Think of the investing proverb, “A rising tide raises all boats.” Online real-money poker sites could easily float in the U.S., as demonstrated by the success of PokerStars, which bagged $1.4 billion in revenue in 2010.

The U.S. commands 25 percent of a global gambling market estimated to be worth $417 billion. Only 3.3 percent of those profits currently come from online gambling, suggesting both room to grow and a tooth-and-nail fight for market share. At the end of the day, investors will have to choose who they think will win the fight.

Don’t Miss: Are Apps and Games a Facebook Moneymaker?

More Articles About:

To contact the reporter on this story: staff.writers@wallstcheatsheet.com To contact the editor responsible for this story: editors@wallstcheatsheet.com

Yahoo Finance, Harvard Business Review, Market Watch, The Wall St. Journal, Financial Times, CNN Money, Fox Business