Zynga Needs Big CastleVille Growth for Stock to Hit $10

January 4th, 2012 by Trefis Team
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ZNGA: Zynga logo
ZNGA
Zynga

Zynga (NASDAQ:ZNGA) is the world’s largest social gaming company, which had a rather disappointing public debut shedding nearly 5% of its stock price on the first day of trading. It competes primarily with other social gaming companies like Electronic Arts (NASDAQ:ERTS) and Playdom which was recently acquired by Disney (NYSE:DIS). We have a $10.20 price estimate for Zynga which stands just above its market price. New Games account for more than 40% of its Trefis price estimate.

Check out our complete analysis of Zynga.

CastleVille: Zynga’s New CityVille

Zynga has made some really popular games like CityVille and FarmVille which had a user base of close to 100 million users at their peak. However, social games can get old fast and their user numbers drop just as quickly as they initially grow.

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CityVille’s user base is now down to less than 50 million while FarmVille now has around 30 million active users. Most games Zynga launched in 2011 like Empires & Allies and Adventure World have peaked early and are already showing a significant decline in their user base. Zynga also launched a sequel to the very popular Mafia Wars – Mafia Wars 2, but it failed to gain any significant traction and its user base has now declined to less than 7 million users.

Source: AppData

Making Hit New Games Crucial for Zynga’s Growth

Zynga desperately needs another mega-hit, like CityVille or FarmVille, in order to continue its explosive top-line growth.

One of Zynga’s recent games, CastleVille, may be the answer to its short-term problems and could help support its stock price. CastleVille, which was launched a month ago, is adding millions of users every week and is now officially the fastest growing game on Zynga. It has already overtaken CityVille in terms of user growth and is on track to become Zynga’s most popular game soon.

As Zynga’s older games lose active users, we expect Zynga’s new games like CastleVille to show a steady growth in active users, and account for an increasing portion of its revenue.

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