Zynga's (ZNGA) Online Gambling Opportunity is Limited
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Price: $8.18 --0%
Rating Summary:
15 Buy, 18 Hold, 1 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
Rating Summary:
15 Buy, 18 Hold, 1 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
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Much has been made of Zynga's (NASDAQ: ZNGA) online gambling potential, but "don't bet the farm" said Evercore Partners ' Ken Sena.
Even if the opportunity does present itself, Sena sees only modest revenue opportunity abroad. "Using Bwin.Party and 888 Holding's average payer penetration and spend levels, which we multiply by Zynga's existing poker & casino users in legalized territories, we estimate a roughly $300 million annual revenue opportunity for Zynga internationally, which presumes Zynga can increase ARPU from ~$7 to ~$30+ where gambling is legal," he commented.
On the impact to earnings, Sena said he value the gambling opportunity to be worth $135 million, or $0.15 per share, which factors two favorable assumptions to Zynga: applies trailing 6x EBITDA and 11x P/E operator multiples to forward estimates and assumes Zynga has a 50% chance of reaching top three operator status internationally. The firm is not assigning option value on the U.S. market after a review of current Federal and state-by-state legislation and punitive tax considerations.
On overall traffic trends for Zynga, the firm noted they are seeing a a ~5% increase in MAUs q/q at 268 million, which is flat y/y, according to AppData. "Recently launched titles such as The Ville and Bubble Safari are showing signs of growth fatigue while initial ChefVille traction remains strong. Casino mainstays such as Poker , Slingo , and Bingo , continue to show stable MAU figures. In addition, we will be looking to see what incremental traction today's release of FarmVille 2 can offer," Sena notes.
Evercore Partners reiterated their Underweight rating and price target of $2.00
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 $2.92 yesterday.
Even if the opportunity does present itself, Sena sees only modest revenue opportunity abroad. "Using Bwin.Party and 888 Holding's average payer penetration and spend levels, which we multiply by Zynga's existing poker & casino users in legalized territories, we estimate a roughly $300 million annual revenue opportunity for Zynga internationally, which presumes Zynga can increase ARPU from ~$7 to ~$30+ where gambling is legal," he commented.
On the impact to earnings, Sena said he value the gambling opportunity to be worth $135 million, or $0.15 per share, which factors two favorable assumptions to Zynga: applies trailing 6x EBITDA and 11x P/E operator multiples to forward estimates and assumes Zynga has a 50% chance of reaching top three operator status internationally. The firm is not assigning option value on the U.S. market after a review of current Federal and state-by-state legislation and punitive tax considerations.
On overall traffic trends for Zynga, the firm noted they are seeing a a ~5% increase in MAUs q/q at 268 million, which is flat y/y, according to AppData. "Recently launched titles such as The Ville and Bubble Safari are showing signs of growth fatigue while initial ChefVille traction remains strong. Casino mainstays such as Poker , Slingo , and Bingo , continue to show stable MAU figures. In addition, we will be looking to see what incremental traction today's release of FarmVille 2 can offer," Sena notes.
Evercore Partners reiterated their Underweight rating and price target of $2.00
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 $2.92 yesterday.
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