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Can Zynga Inc (ZNGA) Be Saved By New Games?

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By Carly Forster

Zynga Inc (NASDAQ:ZNGA) is a San Francisco, California based developer of some of the world’s most popular social network and mobile games, including Farmville and Words With Friends. More than one billion people have played a game by Zynga since the company was founded in 2007. The gaming company released its second quarter earnings report on Thursday, August 7th and its results were rather disappointing. However, Zynga is hopeful that it is moving in the right direction with its association with big named sports games scheduled to be released in the near future.

During its Q2 results, Zynga reported -$0.07 earnings per share, missing analysts’ consensus estimate of -$0.03 by $0.04. During the same quarter last year, the company reported -$0.01 earnings per share. The gaming giant had revenue of $153.00 million for the quarter, compared to analysts’ consensus estimate of $191.21 million. The company’s quarterly proceeds were down 33.7% on a year-over-year basis. On average, analysts’ expect that Zynga will post $0.02 earnings per share for the current fiscal year.

Zynga claims the reason it hit the lower end of its own guidance is due to long term investments in an NFL sports game called NFL Showdown and a golf game based on a deal made with professional golfer, Tiger Woods, which are both scheduled to be released in the near future. The company has also licensed Looney Tunes characters from Warner Bros. in an effort to make a variety of new mobile games. Zynga Chief Executive Officer Don Mattrick said in a statement, “While our quarterly financial results were in line with our guidance range, we aspire to do better and improve execution across our business.” He continued, “Inside Zynga, we recognize that our products have the potential to live for multiple years and with nurturing, refinement and investment, they can grow and scale. We are purposefully competing, and while we would like to be further along, we believe we are making the right decisions to grow our business and unlock long-term shareholder value.”

Shares of Zynga opened at $2.72 on Friday, August 8th. The gaming company has a 1-year high of $5.89 and a 1-year low of $2.70. The stock’s daily moving average is $2.80 and has a 50-day moving average of $3.05. The market cap for Zynga is $2.55 billion and its P/E ratio is not applicable.

On August 8th, Credit Suisse analyst Stephen Ju maintained an Underperform rating for Zynga and cut his price target from $4 to $3.50. He explained, “We maintain our Underperform rating for now but with what appears to a cadence of ten games set for release in any given year, we have to note that the possibility of upward revisions to estimates is increasing given the more ‘at bats’ the company will have.” Ju has a +19.4% average return on all stocks and a 64% success rate in making recommendations. He also has a +17.3% average return on Zynga stock.

On the other hand, on August 8th, Seeking Alpha blogger Jeffrey Himelson was rather positive on Zynga stock, believing the company currently has a “compelling risk/reward opportunity.” He claims that if any of the current games in development at Zynga gain popularity, then investing the stock will certainly be worth the risk. Himelson has a -2.9% average return on all stocks and a 30% success rate in making recommendations.

These financial experts cannot seem to agree if now is the right time to add Zynga to their portfolio. Whose recommendation do you trust?

To see all recommendations for Zynga, visit TipRanks today!

Carly Forster writes about stock market news. She can be reached at [email protected]

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