Zynga Inc (ZNGA)

[Trevor11]

ZNGA: SHAREHOLDERS NOW BEING REWARDED, THIS IS JUST THE START






"...THE SHAREHOLDERS ARE NOW BEING REWARDED FOR THEIR PATIENCE."

WALL STREET IS ONLY GETTING MORE BULLISH ON THE STOCK

ZYNGA INC. HAS A CONSENSUS OUTPERFORM RATING FROM 16 WALL STREET ANALYSTS

ZYNGA INC. (NASDAQ:ZNGA) IS GAINING TRACTION WITH INVESTORS

ZYNGA INC. (NASDAQ:ZNGA) WAS UPGRADED BY BIDASKCLUB…TO A “BUY” RATING IN A NOTE ISSUED TO INVESTORS ON WEDNESDAY.





ZYNGA (ZNGA) FORMS $3.67 DOUBLE TOP; General Dynamics (GD)’s Sentiment Is 1.12
August 25, 2017 - By Vivian Currie


ZYNGA INC (ZNGA) FORMED DOUBLE TOP with $3.93 target or 7.00% above today’s $3.67 share price. Zynga Inc (ZNGA) has $3.18B valuation. The stock increased 1.38% or $0.05 during the last trading session, reaching $3.67. About shares traded. Zynga Inc (NASDAQ:ZNGA) has risen 35.83% since August 25, 2016 and is uptrending. It has outperformed by 19.13% the S&P500…

Source:
https://kgazette.com/zynga-znga-forms-3-67-double-top-general-dynamics-gds-sentiment-is-1-12/





ZYNGA INC. (ZNGA) STOCK RATING UPGRADED BY BIDASKCLUB

POSTED BY TOI WILLIAMS ON AUG 25TH, 2017

ZYNGA INC. (NASDAQ:ZNGA) WAS UPGRADED BY BIDASKCLUB FROM A “HOLD” RATING TO A “BUY” RATING IN A NOTE ISSUED TO INVESTORS ON WEDNESDAY.

Source:
https://www.truebluetribune.com/2017/08/25/zynga-inc-znga-stock-rating-upgraded-by-bidaskclub.html






Analyst Commentary On Zynga Inc. (ZNGA), Spark Networks, Inc. (LOV)
August 25, 2017
ZYNGA INC. (NASDAQ:ZNGA) IS GAINING TRACTION WITH INVESTORS, as evidenced by its 5.19 million shares volume. The daily trading volume average remained 12.1 million shares over the course of 3 months. The stock had opened the regular trading at $3.6 and managed a 1.38% price change to reach $3.67 through the close.
Zynga Inc. (ZNGA) Analyst Opinion
ZYNGA INC. HAS A CONSENSUS OUTPERFORM RATING FROM 16 WALL STREET ANALYSTS, and the number of shares currently sold short amount to at least 2.05% of shares outstanding. The stock sank -1.34% last month and is up 42.8 this year. WALL STREET IS ONLY GETTING MORE BULLISH ON THE STOCK…

Source:
postanalyst.com/2017/08/25/analyst-commentary-on-zynga-inc-znga-spark-networks-inc-lov/



ZYNGA INC. HAS A CONSENSUS OUTPERFORM RATING FROM 16 WALL STREET ANALYSTS

ZYNGA: THIS IS JUST THE START

AUG.24.17 | ABOUT: ZYNGA (ZNGA)

ORTHODOX INVESTOR
LONG/SHORT EQUITY, DEEP VALUE, VALUE, GROWTH
(1,554 FOLLOWERS)

SUMMARY

KEY METRICS ARE SHOWING IMPROVEMENT.
BETTER MANAGEMENT OF COSTS AND A FOCUSED RESEARCH TEAM WILL SAVE COSTS.
EARLY TERMINATION OF SOME TITLES WILL SAVE DEVELOPMENT COSTS.
EV/EBITA MULTIPLE WILL COME IN LINE WITH THE INDUSTRY AVERAGE AS THE PROFITABILITY RISES.

Zynga’s (NYSE:ZNGA) turnaround has finally started to gain momentum. My call on the stock is unchanged and I still believe it is a solid hold for the long-term investors. New investors looking to buy should also consider it as it is A GOOD TURNAROUND PLAY, WHICH CAN YIELD HANDSOME RETURNS.
For any turnaround story to be successful, management is the most important variable in the equation. A clear, well-defined strategy is fundamental to success. ZYNGA’S MANAGEMENT HAS DONE THIS AND THE SHAREHOLDERS ARE NOW BEING REWARDED FOR THEIR PATIENCE. As I highlighted in my first article about the company, mobile revenue was one of the key issues for the company. Its games were hugely popular but the monetization was extremely low.
The company was making a transition from a web-based gaming platform to mobile. The management identified this issue and WE HAVE SEEN A MASSIVE RISE IN MOBILE REVENUE AS A PERCENTAGE OF TOTAL SALES. In the most recent earnings announcement, MOBILE REVENUE WAS 86% OF TOTAL SALES. Both mobile revenue and mobile bookings were up by 30% and 33%, respectively. MOBILE BOOKINGS NOW ACCOUNT FOR MORE THAN 87% OF THE TOTAL BOOKINGS. THIS IS A SUBSTANTIAL MOVE, WHICH HAS RESULTED IN BETTER THAN EXPECTED PROFITABILITY.

Source: Press Release
Year-over-year growth is impressive in bookings and revenue. I will not explain the earnings announcement further as it can be read here. Instead, I will focus on profitability metrics and how it has affected the valuation of the stock.
Zynga’s gross margin has crossed 69%. This is the highest level in the last five quarters. Likewise, the company has reported operating income for the first time in the same period. Zynga’s previous valuations were artificial as the business was not profitable and the valuation was largely fueled by speculation and hope. However, as the company has started to generate profit, we can value the stock on its fundamentals (assuming the trend in profitability continues).
Zynga generated $13 million in EBITA (I am using EBITA instead of EBITDA as gaming companies have negligible depreciation expense unlike industrial units) for the second quarter. I believe we are at the start of the turnaround where we will see profitability grow in the future. Assuming Zynga produces similar EBITA numbers in the next two quarters, we will have full year EBITA of $39 million. The highest figure in the last three years.
This level of EBITA will give us an EV/EBITA multiple of around 61x. An extremely high number. However, typically, EV/EBITA multiples are on the higher side in this industry (around 28x). Zynga’s stock price has moved up sharply in the last few months. As a result, the enterprise value has jumped. ZYNGA DOES NOT HAVE ANY LONG-TERM DEBT ON ITS BOOKS, so the whole value comes from equity.
Also, the cash position is extremely strong (around $740 million). All these factors have contributed towards the high EV/EBITA multiple. Zynga had around $1 in cash when the stock was trading near $2. Its per share cash is still at around 86 cents. As the profitability improves, I expect this multiple to come in line with the industry average.
IF ZYNGA IS ABLE TO GENERATE $100 MILLION IN ANNUAL EBITA, THEN THE STOCK PRICE WILL MAKE A SUBSTANTIAL JUMP. Let’s assume that the company reaches $100 million in EBITA in 2018 and the multiple comes in line with the industry average of 28x. We will have enterprise value of $2.8 billion and an equity value of around $3.54 billion. At these levels, per share price will need to reach $4.10.
I have not changed the number of shares outstanding and cash balances (normally, cash balances will increase as EBITA increases and equity value will be higher). However, if the multiple does not come down and the market continues to value it at the current multiple, then the equity value will be close to $6.9 billion and per share price will need to reach $8.
Management’s strategy to be the best in a category will save it a lot of money. By following this strategy, they will be able to identify if a game is going to be a “forever franchise” for them. If the game does not meet the required criteria, then it can be cancelled and development costs can be reduced. When I first talked about CSR2, some of the readers did not believe that it can be a worthy contributor towards Zynga’s revenues. However, in just a few months, this game has achieved the label of “forever franchise” by the company executives and is likely to be a key contributor towards revenues and cash flows.

Source:10-Q
One of the most important metrics for Zynga was MUP (Monthly Unique Payers). This metric was low and I highlighted that Zynga management needs to work on lifting this metric. We have now seen a considerable improvement in this number as year-over-year growth of 33% is impressive. As the company continues to improve this number, PROFITABILITY WILL RISE FURTHER.
ZYNGA’S TURNAROUND IS GATHERING PACE NOW AND I BELIEVE THE STOCK HAS A LOT OF ROOM TO GROW. LONG-TERM SHAREHOLDERS SHOULD HOLD ONTO THEIR POSITIONS AND ENJOY THE RIDE. Structural changes have resulted in a more focused research and development team. STRONG BALANCE SHEET, FALLING OPERATING EXPENSES AND RISING REVENUES SHOULD ENHANCE MARGINS AND CASH FLOWS. ALL THESE DEVELOPMENTS MAKE ZYNGA AN EVEN MORE ATTRACTIVE INVESTMENT.

Please follow this link to read my previous articles about the stock.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Source:
https://seekingalpha.com/article/4101625-zynga-just-start