Zynga was downgraded by analysts at Vetr from Buy to Hold in a research note issued on Tuesday. The analysts have assigned the game maker a price target of $2.82 per share.
It is all going downhill for Zynga
Zynga enjoyed huge success after the launch of its game Farmville on Facebook in 2009. Moreover, in 2012, the social gaming company reported its highest revenue of $1.28 billion.
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However, the course of luck changed for Zynga as gaming drifted away from the web to tablets and smartphones. Due to increased costs, the firm struggled and began to report huge losses. In 2014, Zynga was just able to manage $690 million in revenue, a figure substantially less than the company’s 2012 earnings. Besides, Zynga’s return on R&D costs is pathetic compared to that of competitors such as King, which makes more than 12% for every dollar spent on R&D, and Glu Mobile, which earns almost twice what Zynga earns on its money spent, according to Streetwise Report.
Further, Zynga’s costs are uncontrolled, and in an industry with almost no barriers to entry, the company has faced cut-throat rivalries. Considering this and the rising clout of rivals, the company’s plans to come up with more games and have a positive attitude towards the future are also looking unlikely to rescue the firm for now.
Consensus rating of Hold
Recently a lot of other analysts also issued their opinions on Zynga. In a research note on Feb. 19, Zacks’ analysts downgraded the company’s shares from Outperform to Neutral and gave a target of $2.70. Also Benchmark Co. analysts lowered their target price on Zynga from $2.45 to $2.36 and gave a Hold rating in a research note released on Feb. 13. On the same day, analysts at Canaccord Genuity also lowered their price target from $4.00 to $2.50, and labeled the gaming company with a Hold rating. Piper Jaffray analysts, in a research note on Feb. 13, assigned a $2.50 price target to the game maker along with a Hold rating.
Overall, the social gaming company has an average rating of Hold and a consensus price target of $3.49. At around 10.37 Eastern, Zynga shares were down 2% at $2.79, while year to date, the stock is up by over 3%.