Jefferies analyst Timothy O’Shea assigned a Buy rating to Zynga (NASDAQ: ZNGA) yesterday and set a price target of $5.25. The company’s shares closed yesterday at $4.32, close to its 52-week high of $4.43.
O’Shea noted:
“It is another acquisition straight out of the Zynga playbook: acquire established mobile franchises at a reasonable multiple, and apply sophisticated user acquisition, analytics, and live services know-how to increase profitability and extend the life of the games. The deal is immediately accretive and we think it makes sense to deploy cash towards EBITDA-generating M&A vs. leaving cash on the balance sheet. Our 2019 bookings & EBITDA ests are coming up 9%. Zynga paid $250MM cash for Gram Games, which will receive additional earn-outs based on achieving annual profitability targets. Assuming Gram could generate $90-120MM of bookings and ~$20-25MM of Adj. EBITDA, this implies a 2019 bookings multiple of 2.1x to 2.7x and an EBITDA multiple of 10.0x to 12.5x. Zynga currently trades at 2.8x bookings and 15.2x EBITDA. The deal closed May 25, so Gram will contribute for 36 days in 2Q results.”
O’Shea has an average return of 20.8% when recommending Zynga.
According to TipRanks.com, O’Shea is ranked #830 out of 4815 analysts.
Currently, the analyst consensus on Zynga is Moderate Buy and the average price target is $5, representing a 15.7% upside.
In a report issued on May 29, Piper Jaffray also maintained a Buy rating on the stock with a $5 price target.
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The company has a one-year high of $4.43 and a one-year low of $3.20. Currently, Zynga has an average volume of 10.62M.
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Zynga, Inc. provides social game services. It develops, markets and operates social games as live services played on mobile platforms such as Apple’s iOS operating system and Google’s Android operating system, and social networking sites such as Facebook.
