After markets closed on Wednesday, Zynga Inc. (NASDAQ: ZNGA) reported better-than-expected first-quarter results and a $250 million acquisition of an ad-tech company. It’s probably the latter that has added more than 5% to the share price Thursday.
Zynga also raised full-year revenue guidance by $100 million and now expects bookings to total $2.9 billion in 2021. It continues to forecast a net loss of $135 million, worse than the consensus estimate for a loss of around $117 million.
The share-price boost is largely attributable to a note from BofA Securities analyst Ryan Gee upgrading the stock from Neutral to Buy and raising his price target from $12 to $13.50. Citing strong first-quarter results, sustainable double-digit organic growth, international expansion and multiple cross-platform titles, Gee said that all added up to “underpin our view ZNGA is in a better position now than at any point in its history on mobile.”
Zynga’s “strategic pivot toward higher-growth/margin ad-tech … enhances the value of ZNGA’s network enough that we view risk/reward as favorable.” Here’s the BofA take on the Chartboost acquisition:
Acquiring Chartboost for $250mn accelerates ZNGA’s strategic pivot from publisher to platform, which we much prefer vs. studio M&A. We see several immediate and[long-term] benefits: 1) cost-savings as ZNGA drives [user acquisition]-spend through its own network (ZNGA’s sees $20-30mn in synergies in 2022); 2) new [revenues] via [third-party] app monetization/distribution; and 3) the combo of [first-party/third-party] data enhances the value of ZNGA’s own platform making it more attractive as an ad partner and/or potential acquirer.
In the near term, Zynga’s outlook “underwhelms,” according to Gee. But that’s only temporary: “We see delayed new [intellectual property] timing/higher [user-acquisition] spend limiting estimates in 2021 but see 2022 benefitting from scaling games, more ads, and less [user-acquisition] with accretion upside from Chartboost.”
Zynga stock traded up about 5% Thursday afternoon, at $10.65 in a 52-week range of $7.42 to $12.32. The consensus price target on the stock is $13.12. The average daily trading volume is 18.5 million shares, and nearly 21 million shares had changed hands with about 90 minutes left in Thursday’s trading session.
24/7 Wall St.Sponsored: Want to Retire Early? Here’s a Great First Step
Want retirement to come a few years earlier than you’d planned? Or are you ready to retire now, but want an extra set of eyes on your finances?
Now you can speak with up to 3 financial experts in your area for FREE. By simply clicking here you can begin to match with financial professionals who can help you build your plan to retire early. And the best part? The first conversation with them is free.
Click here to match with up to 3 financial pros who would be excited to help you make financial decisions.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Editors' Picks
