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Analysts Weigh In On Zynga After Q3 Earnings Miss

Brett Hershman

Zynga Inc (NASDAQ: ZNGA) reported a third-quarter earnings miss Wednesday.

The mobile game developer reported earnings of 1 cent per share, missing estimates by 3 cents. Sales came in at $233.2 million, missing estimates by $16.23 million.

Wedbush Sees 'Compelling Investment' 

Wedbush analyst Michael Pachter maintained an Outperform rating on the company with a $6 price target.

Zynga is a "compelling investment," and the company reported its highest quarterly revenue and bookings in its history, the analyst said. 

“We think that there is potential for shares to appreciate above our price target over the next 12 months if Zynga’s management continues to execute, as we think that the 2020 contribution margin on bookings growth can reach 55 percent,” he said.

KeyBanc Eyes Licensing Deals 

KeyBanc Capital Markets analyst Evan Wingren maintained a Sector Weight rating on Zynga. New licensing agreements are positive for the company's long-term growth and can be accretive to the business, but will likely drive down profitability in the near term, the analyst said. 

Zynga announced that it signed new agreements with Warner Brothers and HBO to release games based on intellectual property from the Harry Potter and Game of Thrones franchises. 

“Two of the three anticipated games will be launching in the back half of next year and should offset some older game attrition while providing opportunities for new user growth,” Wingren said.

View more earnings on ZNGA

“Licensed games tend to have lower gross margin, but we believe the deals can be accretive to current margins long term given the audiences they bring." 

Barclays Stays Bearish 

Barclays analyst Ryan Gee maintained a Underweight rating on Zynga with a $3.40 price target.

The company faces near-term EBITDA pain for potentially long-term franchise gain, the analyst said. 

“Stepping back, the basis for our UW rating rang true this quarter with investment in new games weighing on margins in 2019,” Gee said.

A Growth Strategy

Jefferies analyst Timothy O’Shea maintained a Buy rating with a $5.25 price target.

Zynga’s strategy is pivoting from “fix it” to “grow it” after the company announced up to nine new games set to launch by 2020, the analyst said. 

Price Action

Zynga shares were trading higher by 2.2 percent at $3.72 at the time of publication Thursday. 

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Latest Ratings for ZNGA

Date Firm Action From To
Nov 2018 Credit Suisse Maintains Underperform Underperform
Nov 2018 Barclays Maintains Underweight Underweight
Sep 2018 Stifel Nicolaus Initiates Coverage On Buy

View More Analyst Ratings for ZNGA
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