Wedbush: Solid Quarter for Zynga, CEO Has Brought Change

In a report published Thursday, Wedbush analysts maintained an Outperform rating on

, with a price target of $6, after the company reported robust 1Q results. The company reported its 1Q bookings at $167 million, significantly ahead of the Wedbush estimate of $150 million and guidance of $140-$150 million. All other metrics were better than expected. Zynga announced its 2Q guidance for bookings at $145-$160 million, ahead of expectations. In the report Wedbush noted, "The return of Mark Pincus as CEO brought more change than we expected, and the change appears to us to be for the better. The company trimmed its workforce by 18%, something that we have long believed was overdue, and decided to withdraw from the sports and "runner" game categories. We applaud these moves, as they are expected to save $100 million annually and allow the company to focus on more lucrative and higher potential genres where we believe it has a greater chance of success." The analysts believe that Mr. Mattrick had "put a solid structure in place" from which Zynga can take off for success. However, the change in leadership, focus and "perhaps sense of urgency" that Mr. Pincus has introduced could accelerate the company's return to profitability. "We think that there is potential for shares to appreciate above our target over the next 12 months if Zynga's management executes, as we think that the contribution margin on bookings growth can exceed 35%," the analysts wrote.