ZNGA: EXPECTED...INCREASE BY ROUGHLY 50%, STRENGTH OF EVERGREEN FRANCHISES
EXPECTED...INCREASE BY ROUGHLY 50%.
BY WEDBUSH ($2.89, MAY 1, 2017) WE ARE MAINTAINING OUR OUTPERFORM RATING ... PRICE TARGET OF $4.25.
...MULTIPLE IS 3.0 TIMES FORWARD BOOKINGS, WHICH WOULD VALUE SHARES AT ROUGHLY $4.25.
ZYNGA HAS EXCEEDED BOOKINGS GUIDANCE FOR EIGHT CONSECUTIVE QUARTERS.
THE COMPANY APPEARS TO BE WELL-POSITIONED TO DELIVER BOOKINGS OF OVER $800 MILLION BY YEAR-END…
WE EXPECT FIRST-QUARTER UPSIDE DRIVEN BY THE CONTINUED STRENGTH OF EVERGREEN FRANCHISES. OUR ESTIMATES ARE FOR BOOKINGS OF $195 MILLION
WE EXPECT SECOND-QUARTER BOOKINGS OF $200 MILLION
Hot Research
Zynga Could See a New Dawn With Q1
THE REPORT MAY SHOW THE STRENGTH OF EVERGREEN FRANCHISES,
and the first full quarter of impact from Dawn of Titans.
MAY 2, 2017 12:38 A.M. ET
ZYNGA (ZNGA: NASDAQ)
BY WEDBUSH ($2.89, MAY 1, 2017)
WE ARE MAINTAINING OUR OUTPERFORM RATING ON ZYNGA AND OUR 12-MONTH PRICE TARGET OF $4.25.
ZYNGA (TICKER: ZNGA) SHARES ARE ON THE WEDBUSH SECURITIES INVESTMENT COMMITTEE’S BEST IDEAS LIST.
We think that ZYNGA IS A COMPELLING INVESTMENT. Its market cap of $2.6 BILLION NET OF CASH AND REAL ESTATE LEAVES AN ENTERPRISE VALUE OF ROUGHLY $1.3 BILLION, OR 1.6 TIMES CONSENSUS FISCAL 2017 BOOKINGS. We think that a reasonable MULTIPLE IS 3.0 TIMES FORWARD BOOKINGS, WHICH WOULD VALUE SHARES AT ROUGHLY $4.25.
Zynga will report its first-quarter results after the market close on Thursday, May 4. WE EXPECT FIRST-QUARTER UPSIDE DRIVEN BY THE CONTINUED STRENGTH OF EVERGREEN FRANCHISES. OUR ESTIMATES ARE FOR BOOKINGS OF $195 MILLION AND ADJUSTED EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION (EBITDA) OF $20 MILLION, COMPARED WITH CONSENSUS OF $193 MILLION AND $21 MILLION, RESPECTIVELY, AND GUIDANCE OF $190 MILLION AND $19 MILLION, respectively. ZYNGA HAS EXCEEDED BOOKINGS GUIDANCE FOR EIGHT CONSECUTIVE QUARTERS. Our channel checks indicate relatively consistent grossing performances for Zynga’s key titles quarter-over-quarter, in line with the trends seen in recent quarters. In addition, the first quarter will see the first full quarter of contribution from Dawn of Titans. As such, the guided sequential decline of $12 million appears overly conservative even after accounting for the customary first-quarter advertising hiccup.
Although we expect sequential bookings growth in the second quarter, Zynga may guide at or modestly below the first-quarter level due to its history of conservative guidance. WE EXPECT SECOND-QUARTER BOOKINGS OF $200 MILLION and adjusted Ebitda of $22 million, versus consensus of $198 million and $24 million, respectively. Boggle With Friends launched late in the first quarter, and the company has a number of games in geo-lock at present. We do not expect Zynga to provide full-year guidance, although THE COMPANY APPEARS TO BE WELL-POSITIONED TO DELIVER BOOKINGS OF OVER $800 MILLION BY YEAR-END with growth throughout the year. We are modeling bookings growth of $55 million in 2017 on the assumptions that CSR Racing 2 grows by $30 million from annualization, Dawn of Titans contributes $25 million in its first full year, and the other forever franchises see a largely consistent performance helped by updates. New games should offset discontinued games, and WE EXPECT ADJUSTED EBITDA TO INCREASE BY ROUGHLY 50%.
-- Michael Pachter
-- Nick McKay
-- Matthew Breda
Source:
www.barrons.com/articles/zynga-could-see-a-new-dawn-with-q1-1493699921
