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ZYNGA (Nasdaq: ZNGA) 18 Jun 2021

Updated: Aug 1, 2021

Remember Farmville, the game that was played on Facebook in 2009 and immediately became a viral hit? Zynga, the company that introduced that game to the world wasn’t doing much for many years as it failed to break out of the Farmville universe it created, until now.

Zynga (Nasdaq: ZNGA) delivered strong Q12021 results as revenue grew 68% compared to Q12020, driven by increase in ad revenue and by gamers spending more money on in-app purchases. The beauty of mobile gaming is that people are unlikely to play less as the global economy gradually reopens. Management is forecasting $2.7b in revenue this year, up 37% from 2020.

That works out to be only 3.3x price to expected sales valuation. As can be seen from the monthly chart above, compared with other more established game developers, Zynga has the lowest Price-to-Sales valuation and the higher growth rate.

Monthly active user (MAU) is up 141% from a year ago, as gamers are lured by its popular mobile games like Words with Friends, Harry Potter: Puzzles & Spells, etc.

Chart wise, price had rebounded slightly from the trendline support with Stochastic coming up from the oversold region. Support at about $9.50 and resistance at $11.50, followed by $12.50. JPMorgan has an Overweight recommendation on the stock with Dec-21’s target price at $13 (pls see attached report).

As usual, this writeup was broadcast to Clients on 18 Jun 2021 but posted here only on 22 Jun 2021.

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