Sterne Agee analysts Arvind Bhatia and Brett Strauser maintain their Neutral rating for Zynga Inc (NASDAQ:ZNGA) as the consensus estimates for 4Q and 2014 are too high.

zynga

Zynga’s consensus estimates

We continue to believe consensus estimates for Zynga Inc (NASDAQ:ZNGA)’s 4Q and 2014 are too high. However, with the recent pullback in the stock, we think this risk is largely priced in. Reiterating Neutral rating.

With nearly $2.00 per share in cash on the balance sheet, $0.50 per share in value for the company’s headquarters and an estimated $0.70 in Enterprise Value (1x our 2014 bookings estimate of $579M), we think the stock is mostly pricing in the near-term risk that Street estimates may prove too high.

Zynga’s daily active users

In addition, DAUs (based on Appdata) have improved in recent weeks and could provide a floor on the stock. For the month of January to-date, DAUs have averaged approximately 16.6M versus 15M at the end of 4Q. In the most recent week, they have averaged around 19M. We are not sure if this trend is sustainable, but we recognize this could prove to be a near-term positive for the stock.