Zynga Inc (NASDAQ:ZNGA) received a Buy rating from Jefferies analysts, who are highly positive on the title Words With Friends, a multi-player, scrabble-like word game. Analysts upgraded the stock from the previous rating of Hold with a price target of $4.40 per share.
Words with Friends a “legitimate hit”
Analyst Brian Pitz said that the gaming company has a “legitimate hit” with a multi-player scrabble like game called Words with Friends. Pitz mentioned in the report, “Zynga’s fast-growing mobile business now looks large enough to move the needle, offsetting the headwinds around its legacy Facebook/web game business.”
Pitz said that currently Word with Friends is the third most downloaded app, which is a significant metric reflecting revenue potential. Analyst added that the game should expand its user base on the back of strong seasonal trends around holiday prices and strong demand for video ads.
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In 2009, the game was a major hit and was re-launched on the App store in early October. Words with Friends new version is packed with features including Solo Play, in which a player can practice on their own, and Community Match, which helps find a player the best opponent. The game is free to download and highly popular all time in the list released last year. Zynga Inc’s revenue source is ads on the game.
Exciting product pipeline for Zynga
Additionally, Pitz is also high on Zynga’s 2015 game pipeline including “Tiger Woods Golf” and other titles from the recently acquired developer NaturalMotion, as well as Real Housewives & Bridesmaids-themed versions of Hit it Rich Slots.
In a recent report, Wedbush analysts noted that Zynga is on the right track, but the company needs to make more efforts to face current challenges. The analysts noted that the games maker’s pace of new releases is “underwhelming,” and this along with the company’s past record, makes Zynga a “show me” stock. The WB analysts still assigned the company an Outperform rating and put a price target of $6 on the shares.
On November 6, Zynga posted its quarterly earnings, which were largely in line with expectations, but a majority of analysts want more from the company. Zynga currently trades around $2.75 a share, but shares were up on Tuesday following the report. Year to date shares are down over 35%.