Zynga Poker Mobile

Source: Zynga 

Shares of social gaming giant Zynga (NASDAQ:ZNGA) closed Tuesday up nearly 3% after analyst firm Wedbush reiterated its "Buy" rating and set a price target of $7. Subsequently, Morgan Stanley upgraded the beleaguered game maker to "equal weight." Competitor King (NYSE:KING) recently fizzled on its IPO and pushed Zynga's name back into the spotlight. But could Zynga's share price really jump nearly 63% in the near future? 

Zynga hit a turbulent road after its 2011 IPO, which was launched with a price of $10 a share. Investors soon realized the company's monetization issues. Revenue comes almost entirely from in-game purchases, which only come from about 2% of overall monthly unique players. Zynga's games also aren't racking in the astronomical player numbers of King's Candy Crush Saga

Hitting the $7 mark isn't necessarily an impossible dream, though, if Zynga achieves three main goals. 

1. Growing its casino title  
Analytics firm Distimo called social casino games "one of the most lucrative segments in mobile games and in the mobile app market at large." King isn't a part of that market, but Zynga has a steadily popular casino game that is receiving a makeover to make it more mobile-friendly.

Zynga Poker holds steady with around 10 million monthly active users despite the fact that the game was first released in 2007. In the fourth quarter, Zynga reported that Poker accounted for 21% of overall online game revenues. Poker remains one of Zynga's strongest performers and was one of the top three Facebook games last year. 

There's still room for growth with the updated mobile version. Distimo broke down the global revenue share of the top 10 social casino games in the Apple App store. Zynga makes an appearance, but it's toward the middle of the list.

 Zynga Poker Apple App

Source: Distimo 

Zynga already has one advantage over the higher-performing titles, though: social casino games aren't the sole (or even primary) focus of the company. 

2. Strengthening the core franchise
In Zynga's fourth quarter, online game revenue accounted for over 86% of total revenues. Three games accounted for over three-fifths of that online revenue: Poker, Farmville, and Farmville 2. There's risk in having an overdependence on so few games, but two of those titles are at least five years old. King's dependency problem is much worse. 

King's pre-IPO paperwork showed that Candy Crush Saga accounted for over three-quarters of the fourth quarter's $632 million in gross bookings. The company is currently monetizing about 4% of its monthly unique players, double Zynga's number. When Candy Crush dwindles in popularity, though --and trendy games always fall eventually-King will have a major problem on its hands.   

While King's in a weaker position, Zynga still needs to come out with more titles that can monetize. 

In the short term, though, the company can rely on simply strengthening its core Farmville brand. As with Poker, that's set to happen through a new mobile-friendly version of the franchise called Farmville 2: Country Escape. The game syncs up to what a player has accomplished on the Facebook platform, which might make for an easier transition for players used to computer play.  

Farmville really only needs to carry the weight until Zynga delivers on its recent acquisition. 

3. Utilize the game-changing mobile acquisition 
The main reason that Zynga could well hit $7 per share is the mobile acquisition announced in the company's fourth-quarter report. Zynga paid $527 million in cash and equivalents for NaturalMotion, which has developed the hot mobile games CSR Racing and Clumsy Ninja. CSR Racing has proven its profitability; the game made $12 million in its first month following its 2012 release and has remained a top racing app for Apple's iOS market. Clumsy Ninja Zynga

Source: NaturalMotion

The real potential behind the NaturalMotion buy is the technology, though, which includes the Euphoria game animation engine that's played a part in developing console games including Grand Theft Auto IV and Red Dead Redemption.  

How Zynga decides to use that technology could very well revitalize the company and redefine social gaming. Continuing to allow the technology's use in console games would further diversify Zynga's market as well.  

Foolish final thoughts 
Don't laugh: Zynga could well reach $7 per share or higher. Mobile growth, particularly of Zynga Poker, and well-executed uses of the NaturalMotion acquisition will serve as the deciding factors in the company's future success.

Brandy Betz has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.