BofA Upgrades Zynga On Evolving Mobile Strategy

Zynga Inc ZNGA has more resources and experience than its content aggregator peers and could begin exhibiting “more platform-like qualities that warrant a premium multiple,” according to BofA Securities.

The Zynga Analyst: Ryan Gee upgraded Zynga from Underperform to Neutral and raised the price target from $9.50 to $12.

The Zynga Thesis: The company reported its fourth-quarter bookings 3% higher than the Street expectations, driven by a meaningful advertising beat in WWF and the Rollic acquisition, Gee said in the upgrade note.

“We have mixed emotions about the source of the 4Q beat, but are encouraged by the progress with games in soft launch, see ZNGA as a net beneficiary of iOS ad-changes, and the ’21 margin outlook may prove conservative,” the analyst said. 

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“For ’22, we now see a path for 11% rev growth and our EBITDA is up 18% to $810mn; a 25.4% margin,” he aid.  

“While a new viral hit could be accretive to bookings and EBITDA, ZNGA does not have a strong record of growth through new game development.”

ZNGA Price Action: Shares of Zynga gained 7.35% Thursday, closing at $11.98.