Why We're Not Buying Zynga

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The following video is part of our "Motley Fool Conversations" series, in which analyst John Reeves and advisor David Meier discuss topics across the investing world.

John and David have been studying Zynga, especially since the price dropped. They've decide not to consider this one any further.

Zynga burst onto the scene with its Ville franchises on Facebook. And since then, it's been a leader in social and mobile gaming. David's initial impression of its desire to create a platform was positive. But it looks like Zynga is reinventing itself because it has to, not because it wants to. Management's passion is palpable. But looking more closely at the actions of insiders -- cashing out at a time when they were raising capital to reinvent themselves -- this doesn't look like a management team we want to be associated with. The gaming industry seems to be struggling a bit. Companies like Electronic Arts and Activision continue to invest in their franchises, but can't seem to gain traction. The same goes for Glu Mobile. David and John still think Zynga is an interesting company. But it looks like it will need lots of capital to reposition the business and the returns may be tough to come by. That's not a good situation.

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The article Why We're Not Buying Zynga originally appeared on Fool.com.

David Meier and John Reeves have no positions in the stocks mentioned above. The Motley Fool owns shares of Activision Blizzard and Facebook. Motley Fool newsletter services recommend Activision Blizzard and Facebook. 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.

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