Mobile Game Developer Zynga Has Growing Market Opportunity, UBS Says After Q1 Report

Zynga Inc ZNGA delivered strong execution in the first quarter, outperforming the guidance on the back of healthy results from its portfolio of franchises, according to UBS.

The Zynga Analyst

Eric Sheridan maintained a Buy rating for Zynga with an unchanged $8.30 price target. 

The Zynga Thesis

Zynga’s growth is likely to continue to be driven by its array of live services and forever franchises, with upside from recently launched games, Sheridan said in a Thursday note. (See his track record here.)

Zynga’s balance sheet flexibility also positions the company to generate growth from potential acquisitions, the analyst said. 

Zynga has a track record of solid execution and it faces a large and growing market opportunity, he said. 

Yet "open questions remain around how investments against new title launches might produce returns, the scope of forward growth, and the sustainability of current engagement/monetization levels as well as retention rates for both new & reactivated gamers."

Following Zynga’s beat on both the top- and bottom-line in the first quarter, UBS raised its second-quarter estimates for bookings, adjusted EBITDA and GAAP earnings from $421 million to $460 million, from $76 million to $92 million and from a 4-cent-per-share loss to a 6-cent-per-share loss, respectively.

ZNGA Price Action

Shares of Zynga were down 2.96% at $7.72 at the time of publication Thursday.

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Earnings Scheduled For May 6, 2020