B. of A. Merrill Lynch broke from the pack, initiating Zynga ZNGA -0.10% at neutral with a $10.50 target. In a note, analyst Justin Post said the company was the “best positioned” game maker to benefit from the growing popularity of Facebook, which is home to its well-known titles such as FarmVille, CityVille and Mafia Wars.
Data suggests, however, that the growth of social-game players on Facebook has slowed,” he wrote, adding that recent game launches “have not materially driven up total DAUs [daily average users].”
Post also wrote that the stock has a “lockup expiration risk” later in the year when insiders are able to sell following the IPO, which took place on Dec. 15. Given these risks, the analyst said “we are looking for better visibility on the next potential ‘hit’ title or new game category to get more constructive.”
Zynga shares were last trading down 2% at $9.51. The company priced its IPO above the expected range at $10, but watched its shares fall to the $8 mark by Jan. 9. The stock has jumped about 19% since then.
Scott Devitt of Morgan Stanley set a $14 price target on the shares, calling Zynga “the clear leader in U.S. social gaming.” He said the company’s dominant position in the sector gives it an advantage in launching new titles, and expects spending to moderate after coming off “a heavy investment year.”
“Zynga is entering a deep [2012] launch cycle that could meaningfully reaccelerate user/bookings growth,” Devitt wrote.
Prior to Wednesday, about 10 brokers had started coverage of Zynga, with six rating the shares as a buy, three at neutral and one with an underperform — or sell — rating. Price targets among those brokers ranged from $7 to $14, with the median at $12.
“We believe Zynga presents an attractive, albeit speculative, investment based on positive underlying social-game trends and newer growth opportunities on smart devices,” according to Colin Sebastian of Robert W. Baird, who started coverage with an outperform rating and $12 price target on Tuesday For the latest updates on the stock market, visit Stock Market Today For the latest updates PRESS CTR + D or visit Stock Market news Today
As is the case for any investment vehicle, Investors should take many steps before investing in a penny stock.
ReplyDelete