Zynga Inc (ZNGA)

[Trevor11]

ZNGA: ADDS OVER $100 MILLION ANNUAL BOOKINGS & THE STOCK IS CHEAP COMPARED to (ATVI) and (EA)






MAY 30, 2018, AFTER HOURS MARKET

ZNGA: $8,991,682.56 (A BLOCK TRADE) AFTER-HOURS, @16:20:26 (ET)




ZNGA: THE PURCHASE ADDS OVER $100 MILLION IN ANNUAL BOOKINGS PLUS A GAME PIPELINE.

NATURALLY, THE MOBILE GAME DEVELOPER DIDN'T BUY GRAM GAMES WITHOUT AN EXPECTATION OF BOOSTING BOOKINGS FROM THESE GAMES FAR BEYOND THE $10 MILLION PER MONTH LEVEL.


THE STOCK REMAINS CHEAP COMPARED TO ACTIVISION BLIZZARD (ATVI) AND ELECTRONIC ARTS (EA), SUGGESTING EVEN MORE UPSIDE FROM JUST CAPTURING ANOTHER BOOKINGS STREAM BELOW PUBLIC MARKET VALUES.

THE PURCHASE ADDS OVER $100 MILLION IN ANNUAL BOOKINGS PLUS A GAME PIPELINE.

TAKEAWAY
THE KEY INVESTOR TAKEAWAY IS THAT ZYNGA IS BACK ON THE GROWTH PATH AND THE MARKET IS ONLY SLOWLY CATCHING ON.





ZYNGA: BOOKINGS BOOST
MAY.30.18 | ABOUT: ZYNGA (ZNGA)

Stone Fox Capital
Long/short equity, growth at reasonable price, research analyst, Deep Value
Stone Fox Capital

(11,583 followers)
Summary
ZYNGA PURCHASED GRAM GAMES FOR $250 MILLION plus deferred compensation.
THE PURCHASE ADDS OVER $100 MILLION IN ANNUAL BOOKINGS PLUS A GAME PIPELINE.
The stock remains cheap compared to industry peers despite a return to growth.
Before the open Wednesday, Zynga (ZNGA) announced a $250 million cash purchase of a game developer in Turkey. THE LARGE CASH BALANCE MAKES THE DEAL A SIMPLE FINANCIAL TRANSACTION THAT TRADES BOOKINGS FAVORED BY THE MARKET FOR CASH SITTING IDLE on the balance sheet. The move further instills the undervalued investment thesis.

GRAM GAMES
Gram Games created Merge Dragons! and 1010! that contribute about $9 million in monthly bookings. The company forecast a $10 million boost to Q2 bookings based on a May 25 closing date for the deal.

Merge Dragons! has recently reached a Top 50 grossing ranking for the iPhone, but neither game stands out. The game was released back in 2017 so the customer acquisition and live services skills of Zynga could help boost the game metrics.
Source: Thinkgaming
Both games are listed as part of the hyper-casual puzzle genres and probably lack the recognition that Zynga provides. The press release has a heavy slant towards the games in the pipeline for 2019 and beyond, so the purchase may be a play on a pipeline game and the TALENT THAT GRAM GAMES PROVIDES OUTSIDE OF SILICON VALLEY.
BOOKINGS BOOST
As mentioned above, Zynga didn't provide a lot of financials surrounding the deal. THE BIGGEST DISCLOSURE WAS THE $10 MILLION BOOKINGS BOOST TO Q2 from 36 days of owning the business. Depending on the specific details, THE SUGGESTION IS THAT ANNUALIZED BOOKINGS ARE IN THE $100-120 MILLION RANGE.
According to PocketGamer.biz, the typical deal in the gaming sector is about 2x sales or roughly in the range of this deal for Gram Games. With Zynga having a listed cash balance of $650 million at the end of Q1, the deal trades cash for bookings and reduces the cash balance to $400 million.
Regardless of the dynamics of games bought, any deal is immediately accretive to the stock since Zynga trades an EV/S of 3.3x. THE STOCK REMAINS CHEAP COMPARED to Activision Blizzard (ATVI) and Electronic Arts (EA), suggesting even more upside from just capturing another bookings stream below public market values.

ZNGA EV to Revenues (Forward) data by YCharts

AFTER THE DEAL, ZYNGA WOULD HAVE REVENUES IN THE $1.1 BILLION RANGE for 2019 with a stock value at around $3.7 billion. Excluding the $400 million in cash, the stock now trades at an EV/S multiple of 3x. The stock immediately becomes cheaper from acquiring Gram Games.
The deal becomes a big boost to value if Zynga can boost bookings to the $150 million range combined with closing the multiple gap. NATURALLY, THE MOBILE GAME DEVELOPER DIDN'T BUY GRAM GAMES WITHOUT AN EXPECTATION OF BOOSTING BOOKINGS FROM THESE GAMES FAR BEYOND THE $10 MILLION PER MONTH LEVEL.
An EV/S multiple of 4x would push the value created by the deal to $600 million less the $250 million cash payment. Simply boosting bookings by $2.5 million per month and increasing confidence in the market should produce this outcome.

TAKEAWAY

THE KEY INVESTOR TAKEAWAY IS THAT ZYNGA IS BACK ON THE GROWTH PATH AND THE MARKET IS ONLY SLOWLY CATCHING ON. The addition of Gram Games and the associated boost to bookings should help push the stock back over the crucial $5 level.
Disclosure: I am/we are long ZNGA.
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.
Additional disclosure: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion or consult a financial advisor. Investing includes risks, including loss of principal.

Source:

https://seekingalpha.com/article/4178276-zynga-bookings-boost






ZNGA: $8,991,682.56 (A BLOCK TRADE) AFTER-HOURS, @16:20:26 (ET)


NASDAQ.COM

MAY 30, 2018, AFTER HOURS MARKET:

A BLOCK TRADE @ 16:20:26, $4.32 x 2,081,408 SHARES = $8,991,682.56 VALUE


Source:

https://www.nasdaq.com/symbol/znga/after-hours






FRANK GIBEAU ON WHY ZYNGA’S $250 MILLION ACQUISITION OF GRAM GAMES ADDS UP

May 30th, 2018 - 02:00pm
By Jon Jordan, Contributing Editor

Source:

http://www.pocketgamer.biz/interview/68208/frank-gibeau-on-zyngas-250m-acquisition-of-gram-games/