Needham & Company Starts Zynga (ZNGA) at Underperform; Growth Expected to Slow; Insider Selling Adds Pressure
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Price: $8.18 --0%
Rating Summary:
15 Buy, 18 Hold, 1 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 7 | Down: 11 | New: 1
Rating Summary:
15 Buy, 18 Hold, 1 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 7 | Down: 11 | New: 1
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Needham & Company initiates coverage on Zynga (NASDAQ: ZNGA) with an Underperform.
Analyst, Sean McGowan, said, "We acknowledge Zynga’s exceptionally strong growth in recent years, and we expect growth to continue, though at a substantially lower rate. In ZNGA we see competitive strengths, a cash-rich balance sheet, and new market opportunities ahead, but ZNGA also faces greater competition, user churn and slowing growth of Facebook’s user base. In addition, the shares could be pressured by secondary offering currently in registration and the future expiration of the lock-up periods. We believe the current valuation, which reflects a P/E of 34.5x our 2013 non-GAAP EPS estimate of $0.40 and about 18x our 2013 adjusted EBITDA estimate of $0.64 per share, is more than full. Therefore, we expect ZNGA to underperform the market."
Cash Cow, but Valuation the Concern...McGowan also noted: "A year from now, we believe investors will likely value ZNGA on the basis of expectations for the coming 12 months. We estimate non-GAAP EPS for the 12 mos. ending March 2014 at $0.42, and Adjusted EBITDA/share at $0.67. The current price implies a P/E of almost 33x and an EV/EBITDA multiple of nearly 17x our expectations for the 12 months ending 3/31. We believe this is a full valuation, particularly in light of some anticipated insider selling (both from and after a recently announced secondary offering). We expect the shares to underperform the market in the next few quarters."
For an analyst ratings summary and ratings history on Zynga click here. For more ratings news on Zynga click here.
Shares of Zynga closed at $13.76 yesterday.
Analyst, Sean McGowan, said, "We acknowledge Zynga’s exceptionally strong growth in recent years, and we expect growth to continue, though at a substantially lower rate. In ZNGA we see competitive strengths, a cash-rich balance sheet, and new market opportunities ahead, but ZNGA also faces greater competition, user churn and slowing growth of Facebook’s user base. In addition, the shares could be pressured by secondary offering currently in registration and the future expiration of the lock-up periods. We believe the current valuation, which reflects a P/E of 34.5x our 2013 non-GAAP EPS estimate of $0.40 and about 18x our 2013 adjusted EBITDA estimate of $0.64 per share, is more than full. Therefore, we expect ZNGA to underperform the market."
Cash Cow, but Valuation the Concern...McGowan also noted: "A year from now, we believe investors will likely value ZNGA on the basis of expectations for the coming 12 months. We estimate non-GAAP EPS for the 12 mos. ending March 2014 at $0.42, and Adjusted EBITDA/share at $0.67. The current price implies a P/E of almost 33x and an EV/EBITDA multiple of nearly 17x our expectations for the 12 months ending 3/31. We believe this is a full valuation, particularly in light of some anticipated insider selling (both from and after a recently announced secondary offering). We expect the shares to underperform the market in the next few quarters."
For an analyst ratings summary and ratings history on Zynga click here. For more ratings news on Zynga click here.
Shares of Zynga closed at $13.76 yesterday.
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