Social game developer Zynga (ZNGA) has posted first quarter bookings of $425 million, easily beating the consensus estimate of $407 million, and guidance of $400 million.
“Q1 represented the best first quarter revenue and bookings performance in the company’s history, benefitting from broad-based live services strength throughout the quarter” comments Wedbush analyst Michael Pachter. He reiterated his Zynga buy rating on May 7 with a $9.25 price target (16% upside potential).
In particular, Empires & Puzzles and the company’s Social Slots portfolio both experienced record revenue and bookings quarters, with Empires & Puzzles, Merge Magic!, Game of Thrones Slots Casino, and Merge Dragons highlighted as the primary drivers of year-over-year top-line growth.
Zynga reported revenue of $403.77M (up 52.1% year-over-year), beating the Street forecast by $13.17M. However Q1 GAAP EPS of -$0.11 missed expectations by $0.10.
Looking forward, Zynga boosted FY:20 guidance for bookings to $1,800 million from $1,750 million, and for adjusted EBITDA to $360 million from $350 million. This compares to prior consensus estimates of $1,761 million and $357 million respectively.
The company noted that its release pipeline is still intact, with Harry Potter: Puzzles & Spells, Puzzle Combat, and FarmVille 3 now all in soft launch, and at least one of these titles slated to launch in the second half of the year.
“Zynga appears positioned to substantially exceed its full-year guidance” cheers Pachter. “Until there is a therapeutic solution or a vaccine to prevent infection, we are skeptical that non-essential businesses will ask their employees to return to the workplace” the analyst writes.
“Should shelter-in-place persist for the balance of the year, we believe Zynga’s second half guidance will prove to be too low by as much as $100 million or more.” If his assumptions prove correct, Pachter sees FY:20 adjusted EBITDA as closer to $400 million.
Overall, the stock has a cautiously optimistic Moderate Buy Street consensus with an $8 average analyst price target. With a 30% year-to-date gain already realized, the average price target indicates upside potential of just 6%. (See ZNGA stock analysis on TipRanks).
“Our hypothesis that mobile game engagement would suffer due to reduced commuting and wait times by busy adults has been dispelled” wrote Wells Fargo analyst Brian Fitzgerald post-print, as he bumped up his price target to $9 from $8 previously.
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