Zynga May Outperform According to Wedbush: Keep A Close Eye on Earnings

Wedbush analyst Michael Pachter reiterates his outperform rating on

leading up to Zynga's earnings announcement on August 7th. Some of his optimism is fueled by the launch of sequels to pre-existing franchises along with game releases: “Bookings should grow sequentially from $161 million in Q1 driven by mobile, with a new Zynga Poker and Farmville 2 launching in March and April, respectively. Neither game cracked the top 5 spots of the AppAnnie grossing chart on a sustained basis, a position that suggests annualized bookings of $200 million or more. We expected another release late in the quarter, with the Other bookings figure growing YoY, primarily from NaturalMotion licensing. We believe that Zynga will release at least one game in Q3 and another in Q4, allowing it to hit FY guidance.” Michael Pachter mentions that higher margins, paired with bookings growth will drive the stock price higher: “Maintaining our OUTPERFORM rating and 12-month price of $7. Our PT reflects an EV/bookings multiple of roughly 4x our 2015 bookings estimate and an EV/EBITDA multiple of roughly 19x our 2015 estimate. We believe the relatively high multiple is warranted, as the risk of negative earnings or cash flow has been mitigated and bookings and EBITDA have begun to grow. Zynga shares are on the Wedbush Securities Investment Committee's Best Ideas List.” Assuming Michael Pachter is correct, Zynga has 147% upside from Monday evenings price quote of $2.83.