Zynga Inc: What Analysts Think Post-Earnings

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Zynga Inc (NASDAQ:ZNGA)’s Underperform rating has been reaffirmed by research analysts at Bank of America in a research note issued to investors on Friday. The analysts have lowered their price target from $3.20 to $3 as well.

Zynga in transition phase

Following the earnings announcement on Thursday, Sterne Agee analysts maintained their Neutral rating on Zynga. Analyst Arvind Bhatia noted that the company is transforming itself from an Internet-based gaming company to more of a mobile-focused one. For the third quarter, revenue from mobile-based bookings increased by 45% year over year, accounting for 55% of the total bookings, which is up 5% sequentially.

Bhatia also mentioned that a few signs of stabilization can be seen as bookings were flat quarter over quarter and a 10% year over year decline in web revenue was compensated for by the a 10% quarter over quarter rise in mobile bookings. DAUs were down 9% quarter over quarter, which was nearly compensated for by the 8% rise in monetization (ABPU). For 2014, Sterne Agee lowered its EBITDA estimate for Zynga from $50.1 million to $49.7 million. However, for 2015 they have raised their estimate from $50.3 million to $74.4 million.

Mixed views from Credit Suisse

Credit Suisse Group AG reiterated its Underperform perform rating on the game maker and raised their price target from $3.42 to $3.44. The analysts noted that the company’s financial performance was impressive but that key performance indicators are weakening.

“Engagement metrics (MAUs, MUUs, MUPs) all trended negatively while ARPU increased 11.4% as the casual player base continues to churn off, leaving only the hardcore, higher-paying user base,” wrote Credit Suisse analysts. They further noted that Zynga’s ad revenue came in better than expected, but online game bookings were lower than what they expected.


Many other analysts have also issued their verdicts on Zynga. In a research note on Friday, analysts at Needham & Company LLC upped their rating from Hold to Buy and gave the company a price target of $3.25. Zacks analysts, in a research note on Sept. 8, lowered their rating from Outperform to Neutral with a price target of $3.30. Presently, Zynga has a consensus rating of Hold and a consensus price target of $3.75.

On Monday, Zynga shares closed up 2.06% at $2.48, and in pre-market trading, shares were up by over 5% at $2.61.


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