Credit Suisse: Aiming For Higher Focus With Zynga

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In a report published Thursday, Credit Suisse analysts maintained an Underperform rating on
Zynga Inc
ZNGA
, with a price target of $2.92, even after the company reported strong 1Q bookings and adjusted EBITDA. Zynga reported its 1Q15 bookings and adjusted EBITDA at $167.4mm and $2.1 mm, significantly better than its guidance of $140mm-$150mm and ($25)mm-($15)mm and Credit Suisse estimates of $157.2mm and ($11.0)mm, respectively. "While Zynga's user metrics fell short and conversion rate was in-line, ARPU exceeded our estimates and drove outperformance versus guidance and expectations on game bookings," the analysts said. Zynga's CEO Mark Pincus announced plans to narrow the company's development focus and implement a cost reduction program that is estimated to result in annualized savings of about $45 million, with the elimination of 18 percent of the workforce, as well as about $55 million in annualized savings via other cost trimming initiatives. The EPS estimates for 2015 and 2016 have been raised from -$0.01 to $0.02 and from $0.04 to $0.08, respectively. "While our bottom line estimates for 2015 rise on the heels of this announcement, our out-year numbers remain essentially unchanged as we were already anticipating a recovery scenario for gross bookings. And we wait to see if the fruits of Zynga's recent development efforts and upcoming game releases (anticipated 6-8 per year) begin to exert a greater influence on the P&L," the analysts added.
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Posted In: Analyst ColorReiterationAnalyst RatingsCredit Suisse
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