Zynga (NASDAQ:ZNGA) is the leader in social gaming and is charging forward in the mobile gaming space by acquiring mobile gaming studios and launching new mobile games on iOS and Android. We know that almost all of Zynga’s revenues are generated by Facebook, but recently, after Facebook filed its S-1 filing for an IPO, it was revealed that Facebook depends on Zynga too. According to its S-1 filing, Zynga accounted for more than 12% of Facebook’s overall revenue in 2011. Facebook even explicitly listed its dependence on Zynga as a risk factor. Zynga competes primarily with Electronic Arts (NASDAQ:EA), Playdom which was recently acquired by Disney (NYSE:DIS) and other independent social gaming studios. New Games account for over 40% of Zynga’s $10.20 Trefis price estimate. Our price estimate for Zynga accounts for dilution due to stock options and restricted stock, which results in a deflated value.
Facebook’s rising tide lifts all social boats
A lot of companies whose businesses are tied to Facebook saw their stock prices rise following the IPO filing. Zynga, which was trading under $10, its IPO price, since it went public, saw its stock price rise to an all-time high, before settling almost 25% above its IPO price at $12.4.
Since there is a high degree of correlation between Zynga’s revenue and Facebook’s revenue, some analysis of Facebook’s Q4 2011 numbers suggest that Zynga will see significant revenue growth in Q4 2011, much higher than expectations. 
New games and foray in online gambling to drive Zynga’s growth
Zynga is currently planning to enter the online gambling market with its Casino social games like Poker and Bingo. We expect a significant revenue boost should Zynga succeed in entering the lucrative online gambling market in the coming years.
Zynga’s other new games like Hidden Chronicles and Scramble with Friends are also expected to attract more and more casual gamers in the coming years, and generate increasing amounts of revenue.Notes: