Analysts at Jefferies Equity Research maintained their estimates on Zynga Inc (NASDAQ:ZNGA) as the online gaming company prepares for the launching of its two real-money casino games in the United Kingdom.
According to the analysts, the financial impact of the two games will be low and they will monitor closely its monetization and usage trends.
The stock price of Zynga Inc (NASDAQ:ZNGA) is up by almost 15 percent to $3.53 per share around 1:06 PM on Wednesday in New York. Jefferies Equity Research has a hold rating and $3.00 price target for the shares of the company.
According to Jefferies analyst, Brian Pitz and his team, Zynga Inc (NASDAQ:ZNGA) is expected to release Zynga Plus Poker and Zynga Plus Casino in the U.K. Online gambling in the country is legal, well established and the market is competitive. Pitz and his fellow analysts estimated that online gaming company will generate an annual revenue of around $77 million to $115 million across all its games in the U.K., which represents an increase between 6 and 9 percent. The company previously stated that no single international country accounted for more than 10 percent of total revenue from the U.K.
The analysts cited that Zynga Inc (NASDAQ:ZNGA)’s new games are “immaterial driver” on the revenues since it will only be available on the company’s website. They noted that Zynga only prioritized its website starting last year when it decides to diversify from Facebook Inc (NASDAQ:FB). The social network giants’ website accounts 81 percent of bookings and 18 percent on mobile games last year.
In addition, the analyst noted that Zynga Poker, the company’s most popular game generated $243 million revenue globally in 2012. Based on the assumption that Zynga Inc (NASDAQ:ZNGA) is generating 6 to 9 percent in revenue from the U.K., they estimated that its revenue in will be approximately $15 to $22 million per year or around $1 to 2 million per month.
“Right now, it is unclear whether real-money games will cannibalize revenue from Zynga’s current crop of casino games. We continue to believe the primary focus is to prepare Zynga Inc (NASDAQ:ZNGA) for potential legalization of online poker in the US,” the analysts said. They added they are optimistic on this idea because of the fact that New Jersey recently legalized online gambling.
Zynga Inc will be launching its two new real-money casino games in partnership with Bwin.party Digital Entertainment. Yesterday, Dan Porter, Zynga’s vice president of general management resigned from the company. He previously stated that the company copied games from other developers.
