After markets closed on Wednesday, Zynga Inc. (NASDAQ: ZNGA) reported better-than-expected first-quarter results and a $250 million acquisition of an ad-tech company. It\u2019s probably the latter that has added more than 5% to the share price Thursday.\t\t\t<\/p>\n
Zynga also raised full-year revenue guidance by $100 million and now expects bookings to total $2.9 billion in 2021. It continues to forecast a net loss of $135 million, worse than the consensus estimate for a loss of around $117 million.<\/p>\n
The share-price boost is largely attributable to a note from BofA Securities analyst Ryan Gee upgrading the stock from Neutral to Buy and raising his price target from $12 to $13.50. Citing strong first-quarter results, sustainable double-digit organic growth, international expansion and \u201cmultiple cross-platform titles, Gee said that all added up to \u201cunderpin our view ZNGA is in a better position now than at any point in its history on mobile.\u201d<\/p>\n
Zynga\u2019s \u201cstrategic pivot toward higher-growth\/margin ad-tech \u2026 enhances the value of ZNGA\u2019s network enough that we view risk\/reward as favorable.\u201d Here\u2019s the BofA take on the Chartboost acquisition:<\/p>\n
\nAcquiring Chartboost for $250mn accelerates ZNGA\u2019s strategic pivot from publisher to platform, which we much prefer vs. studio M&A. We see several immediate and[long-term] benefits: 1) cost-savings as ZNGA drives [user acquisition]-spend through its own network (ZNGA\u2019s sees $20-30mn in synergies in 2022); 2) new [revenues] via [third-party] app monetization\/distribution; and 3) the combo of [first-party\/third-party] data enhances the value of ZNGA\u2019s own platform making it more attractive as an ad partner and\/or potential acquirer.<\/p>\n<\/blockquote>\n
In the near term, Zynga\u2019s outlook \u201cunderwhelms,\u201d according to Gee. But that\u2019s only temporary: \u201cWe see delayed new [intellectual property] timing\/higher [user-acquisition] spend limiting estimates in 2021 but see 2022 benefitting from scaling games, more ads, and less [user-acquisition] with accretion upside from Chartboost.\u201d<\/p>\n
Zynga stock traded up about 5% Thursday afternoon, at $10.65 in a 52-week range of $7.42 to $12.32. The consensus price target on the stock is $13.12. The average daily trading volume is 18.5 million shares, and nearly 21 million shares had changed hands with about 90 minutes left in Thursday\u2019s trading session.<\/p>\n<\/p>\n