Zynga (ZNGA) Remains a 'Show Me' Story, Sterne Agee Says

Sterne Agee analyst Arvind Bhatia reiterated a Neutral rating Zynga (NASDAQ: ZNGA) following Q3 results.

Bhatia commented, "Zynga’s transition from a web-centric gaming company to a mobile-focused company continues; mobile bookings represented 55% of the mix (up from 50% last quarter) and saw a 45% increase in audience y/y. There are a few signs of stabilization as bookings were flat Q/Q with web revenue down 10% y/y offset by a 10% increase Q/Q in mobile bookings. Still, overall traffic (DAUs) declined 9% Q/Q offset by an 8% uptick in monetization (ABPU).

He added, "ZNGA shares remains in the “show me” camp during the ongoing transition, which management has acknowledged is taking longer than expected, given game delays and the resultant pressure on traffic, bookings and margins. As new games (including licensed games, as well as games from Natural Games studio) are launched in 2015 and core franchises remain stable, growth could resume. Meanwhile, the company’s balance sheet ($1.1B in cash) provides downside protection."

The firm is adjusting FY14 Adjusted EBITDA estimate to $49.7M from $50.1M and raising FY15 estimate to $74.4M from $50.3M.

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 $2.36 yesterday.

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