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Zynga inventory was upgraded on Thursday, a day after the corporate reported upbeat earnings.
Dreamstime
Zynga
‘s better-than-expected first-quarter earnings and its $250 million acquisition of an ad-tech company are reason enough to buy the stock, according to BofA Securities.
Analyst Ryan Gee upgraded his rating on the mobile videogame maker’s inventory to Buy from Hold on Thursday, and lifted his goal worth to $13.50 from $12. Shares of Zynga (ticker: ZNGA) jumped 5.6% to shut at $10.71 on Thursday.
In a notice to purchasers, Gee described Zynga’s intention to acquire San Francisco-based Chartboost as a shift within the firm’s technique, to change into a platform that sells cellular promoting—inside video games. Currently Zynga is thought for publishing cellular videogames. The analyst predicted that this is step one in a yearslong plan to rework the enterprise into a cellular advert powerhouse.
Chartboost has developed a cellular self-serve promoting platform that reaches greater than 700 million month-to-month customers. Beyond entry to the corporate’s community and know-how, shopping for the platform will save Zynga $20 million to $30 million in 2022, Gee mentioned.
Gee wrote within the notice that Zynga’s flip towards the higher-growth, higher-margin enterprise of advert know-how is transferring quicker than he anticipated and makes the inventory look particularly favorable.
The larger worth goal is deserved, Gee mentioned, as a result of Zynga must be valued nearer to an ad-tech firm, not a videogame writer. He values Zynga inventory at 12 to 14 occasions 2022 adjusted revenue. In comparability, ad-tech corporations are value greater than 40 occasions 2022 adjusted revenue, Gee mentioned.
Zynga is a much-liked inventory on Wall Street. Eighteen analysts fee shares a Buy, one has a Hold, and there’s a lone Sell ranking. The common goal worth is $13.27, which suggests upside of about 25%. Barron’s took a positive view of the inventory in October, arguing that it was well-positioned to revenue from the billions-strong viewers for cellular video games.
Zynga reported better-than-expected first-quarter earnings on Wednesday. Chief Executive
Frank Gibeau
credited the corporate’s video games made by its latest Rollic acquisition and its Harry Potter title, amongst different issues.
Gee mentioned the corporate’s near-term prospects underwhelmed him, damage by weaker-than anticipated revenue within the second quarter and the delay of a title launch. Next 12 months, nevertheless, the corporate is predicted to profit from scaling its video games and adverts.
Zynga inventory has superior about 40% up to now 12 months, whereas the
S&P 500
index has climbed 46%.
Write to editors@barrons.com
