Why Break From Facebook Is Good for Zynga: Pro
Technology Editor, CNBC.com
Zynga and Facebook's revised agreement, which allows Facebook to develop its own games, is actually good for the gaming company, said Michael Pachter of Wedbush Securities on CNBC's "Halftime Report."
"Big deal, Facebook can make games. They're not going to. Zynga is going to make $30 million more because of this amendment. That's a big deal," Pachter said Friday.
Zynga shares fell as much as 10 percent Friday after news of the new deal was reported on Thursday.
While the change in terms allows Facebook to get into the gaming business, it also gives Zynga greater freedom from Facebook.
The "Farmville" creator no longer has to use Facebook credits on Zynga games, and Zynga can launch games on other platforms.
The company is now getting the same treatment as all other game developers on Facebook's platform, something that will actually boost Zynga's revenue, Pachter said.
While Zynga has benefited from some preferential treatment from its partnership with Facebook, the gaming company has also been very limited in its ability to grow beyond the social network's platform.
Now that Zynga has the same rights as its competitors — including Kabam and King.com — the gaming company can expand and offer games on its own site, Zynga.com, without being required to link users to the Facebook platform.
Pachter, who rates Zynga "outperform," said that because Zynga can now expand to new platforms and offer additional payment options, it is likely the company will attract additional players who are not Facebook users.
"There's value in Zynga. They have 300 million users," he said. "I think that their cash flow goes up by $30 million and their cash bleed gets cut in half. They're going to be profitable next year. I think the stock is going to go up."