Please ensure Javascript is enabled for purposes of website accessibility

Everybody Loves Zynga

By Rick Munarriz – Updated May 2, 2019 at 4:07PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Zynga is trading at its highest level in nearly seven years, and analysts are juicing up their price targets on the stock.

Several Wall Street pros are jacking up their price targets for Zynga (ZNGA) on Thursday after the mobile gaming publisher put out another strong quarter. Revenue rose 27% to hit $265 million, exceeding the $240 million that it was targeting earlier this year for the period. Bookings fared even better, skyrocketing 64% to $359 million. Zynga's initial guidance was calling for just $325 million in bookings.

Every couple of years finds a new slate of drivers at Zynga. A decade ago, this was a Facebook play, as folks on the leading social networking site would be playing desktop versions of FarmVille, Mafia Wars, and other Zynga diversions. Just a few years ago, it was Zynga Poker and other casino-related titles fueling the excitement. These days, Zynga is primarily a smartphone and tablet app specialist -- a whopping 93% of its revenue is generated through mobile gameplay -- and its hot titles like Empires & Puzzles, CSR2, and the recently acquired Merge Dragons! are delivering the hearty double-digit growth.

The stock's return to favor is long overdue. Zynga hit six-year highs on Thursday.

Cover art for Zynga's CSR2 car-racing game.

Image source: Zynga.

Raising the bar

Zynga is boosting its full-year guidance, and analysts are also doing their fair share of lifting. Several Wall Street analysis companies are raising their price goals following Wednesday afternoon's impressive quarterly report.

Analyst New Target Old Target
Jefferies $7.00 $5.75
Benchmark $8.00 $5.00
Stephens $6.50 $5.25
Morgan Stanley $6.80 $5.75
Piper Jaffray $7.25 $6.00

Source: The Fly.

Four of the five analysts have bullish ratings on the stock, and even the neutral pro is offering up some encouraging comments. Jeff Cohen at Stephens raised his bookings estimates for this year and next year following the strong financials results. He sees all but one of Zynga's "forever franchises" -- games capable of generating north of $100 million per year and sustainable for five years -- firing on all cylinders.

There was also one analyst upgrade. Colin Sebastian at Baird lifted his rating from neutral to outperform. He sees the turnaround at Zynga working. Organic growth is improving and successful recent acquisitions are paying off, two factors that should make Zynga have less riding on new releases. He joins Mike Hickey at Benchmark in lifting his price target on the stock from $5 to what is now a Street high of $8.

Zynga is back. This is its strongest quarterly revenue growth in nearly four years, and it's building on the momentum it established in 2017 and 2018 with back-to-back years of revenue growth. You have to go all the way back to 2012 to find the last time that we've seen that happen, and it's probably not a coincidence that the springtime of 2012 was the last time that the shares were as high as they are right now.

The stock still has some big gains to make before it gets back to its 2011 IPO price of $10, but suddenly that goalpost doesn't seem unrealistic. It took time to get it right, but Zynga's finally back in the game.

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Rick Munarriz has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Facebook. The Motley Fool recommends Zynga. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Zynga Inc. Stock Quote
Zynga Inc.

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/29/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.