Method To The Zynga Madness
By Paulo Santos:In the last 10 days, Zynga (ZNGA) managed to go from $8.53 to $13.34, for a full 56% return. Given how overvalued the stock seemed even before rallying, it's hard to see why it would go up so much. But there's a method to the madness. You can actually rationalize the climb. It has to do with Facebook's IPO. Facebook will certainly get a $100 billion valuation right out of the gate, and will then add several tens of billions to that when it trades. Now, through Facebook's S-1, we got to know that it:
- Had revenues of $3.71 billion in 2011;
- 12% of those revenues came from Zynga;
- 17.6% of Facebook's revenues are from virtual goods and payments and that is the fastest growing segment.
We also knew that Zynga had $1 billion in TTM revenues and is growing about as fast as Facebook itself, which is expected toComplete Story »