The rise and fall of Zynga (ZNGA) may have held back other online gaming companies for a bit, but nothing seems to be stopping Glu Mobile (GLUU) and King Digital Entertainment (KING.DL) these days.
Glu Mobile was one of last week's trend-bucking winners, posting its third consecutive week of double-digit percentage gains. The success that Kim Kardashian: Hollywood has had since rising up the charts for iOS and Android downloads shortly after the free-to-play game's late June debut has been dramatic. Over the past three weeks we've seen Glu Mobile stock rise 19%, 13%, and 14%, respectively for a three-week return of 53%.
Kardashian may have named her child North, but it also seems to apply to Glu Mobile's stock these days. CEO Niccolo de Masi told Bloomberg last week that this may be his company's biggest game of the year.
King Digital doesn't have to speculate about what game will be its biggest contributor in 2014. It relies on Candy Crush Saga for two thirds of its gross bookings at the moment. However, it too has had success with a new game ranking near the top of iOS and Android downloads with Bubble Witch 2 Saga.
King Digital hasn't had the kind of run that we've seen at Glu Mobile, but its 21% total return over the past three weeks is something that would please any investor. It also briefly topped its March IPO price of $22.50 earlier this month, something that Glu Mobile (going public at $11.50 in 2007) and Zynga (hitting the market in 2011 at $10) aren't likely to do anytime soon.
All three companies are expected to post double-digit revenue growth this year, but Zynga won't grow as quickly as the two market darlings. Zynga's growth will actually still find it well behind where it was when gross bookings peaked in 2012, inching higher off of the depressed levels of last year.
At a time when King Digital is collecting analyst upgrades and Glu Mobile is receiving more media coverage than usual, the Zynga story for investors centers largely around how close it's trading to its hefty net cash position. That could change. After several deficit-riddled quarters analysts see Zynga breaking even in its recently concluded quarter, joining Glu Mobile and King Digital as profitable casual gaming specialists. Investors may want to wait for that to become official, but we may also see the same forces that dragged shares of Glu Mobile and King Digital lower after Zynga flopped reverse themselves with Zynga moving higher in sympathy with the success of Glu Mobile and King Digital.
The game's afoot, and now it's time for Zynga to be the coattail play -- only this time with the coat moving in the right direction.
