Zynga (ZNGA): Notes from Investor Meetings - Wedbush
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FBR Capital analyst, Michael Pachter, reiterated his Outperform rating on shares of Zynga (NASDAQ: ZNGA) and thinks "Zynga is a compelling investment". The company's market cap of $2.5 billion includes $868 million in cash and securities, as well as an estimated $500 million in real estate, leaving an enterprise value of $1.1 billion, or 1.3x consensus FY:17 bookings. The analyst thinks a reasonable multiple is 3x forward bookings, which would value shares at $4.25.
The analyst took ZNGA's CEO, Frank Gibeau, on two days of investor meetings and learned that Mr. Gibeau does not expect the company to expand into new game categories for the foreseeable future. In part, this is due to his reluctance to become reliant upon significant paid acquisition spending for new users. Instead, the focus remains on improving the live services of its existing games, with better social interaction seen as a key element for all Zynga releases going forward. Better live services are expected to eventually lead to better retention and monetization for the existing portfolio, which will in turn reduce Zynga’s reliance on hoping that a new release becomes a hit.
No change to the price target of $4.25
Shares of Zynga closed at $2.85 yesterday.
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