Zynga (NASDAQ: ZNGA) is a San Francisco, California based developer of some of the world¹s most popular social network and mobile games, including Farmville and Words With Friends. More than one billion people have played a game by Zynga since the company was founded in 2007.
Zynga in the News
Zynga announced its third quarter earnings report on Thursday, November 6th, leaving both analysts and investors alike unclear on the company¹s future. Many believe that the company¹s only fighting chance of survival is its hit mobile game franchise, ŒWords With Friends.¹
In its Q3 earnings, Zynga reported -$0.01 earnings per share for the, meeting analyst expectations. During the same quarter in the prior year, the company posted ($0.02) earnings per share. Zynga had revenue of $176.60 million for the quarter, compared to the consensus estimate of $171.70 million. The company¹s quarterly revenue was down 12.8% on a year-over-year basis. On average, analysts predict that Zynga will post $-0.01 earnings per share for the current fiscal year.
Zynga has struggled as of recent to develop new games at a consistent pace. CEO Don Mattrick said in the report, ³We have been operating with purpose and it has taken us some time to transform our business as we faced some execution challenges in the quarter. 2014 has been an investment year for us as we assembled a new leadership team, reorganized the company and reset our product pipeline.² He continued, ³As we move forward and aggressively compete in an exciting market, we continue to believe that we are well positioned to take advantage of our global scale and diversified product portfolio, and we remain committed to working together as a team to deliver long term value for our consumers, employees and shareholders.
A Financial Expert¹s Opinion
On November 11th, Jeffries analyst Brian Pitz upgraded his rating for Zynga from Hold to Buy with a $4.40 price target, believing the companys ŒWords With Friends¹ franchise to be ³a legitimate hit.²
Pitz explained, Zynga¹s ³fast-growing mobile business now looks large enough to move the needle, offsetting the headwinds around its legacy Facebook/web game business.² Pitz continued to point out that ŒWords With Friends¹ is currently the #3 most downloaded app, possessing a lot of potential to move Zynga forward. In addition, ³The game should benefit from strong seasonal trends around holiday ad prices, and strong demand for video ads.²
Pitz also anticipates Zynga¹s pipeline of games in 2015 will help gain the company¹s momentum.
Zynga shares shot up 5% in early Wall Street trading as a result of the upgrade.
Brian Pitz¹s Past Recommendations
Pitz has a history of rating stocks among a variety of sectors, such as Amazon (NASDAQ: AMZN) and SFX Entertainment (NASDAQ:SFXE), helping him earn an overall success rate of 62% and a +11.7% average return per recommendation.
Pitz last rated Amazon on October 24th of this year with a Buy. Since then, shares have gone up from $287.06 to $311.47. The Jeffries analyst has rated Amazon 9 times since 2009, earning a 63% success rate recommending the stock.
Separately, Pitz last rated SFX Entertainment with a Buy on August 18th when shares of the company were $6.76. Shares of SFX have since dropped to $5.13. Pitz has rated the stock 4 times with 0% success.
Conclusion
Zynga has been struggling to stay relevant, but Brian Pitz sees great potential. Do you trust his latest recommendation based on his financial advice history?
