Is There Any Room For Zynga’s Stock Price Growth?

by Trefis Team
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Zynga’s (NASDAQ:ZNGA) stock price has over 10% room for growth, in our view. The company’s fair price estimate based on expected 2019 earnings is $7, according to Trefis estimates, which compares with a near $6 current market price. Zynga creates social games such as CSR Racing, FarmVille, Zynga Poker, and Words With Friends. The company provides its games for different platforms including Facebook, iPhone, and Android. Its end users include mobile gamers across the globe. Zynga competes with other gaming companies, including Activision Blizzard and Electronic Arts. In this note we discuss our valuation of Zynga’s stock. You can look at our interactive dashboard analysis ~ Zynga Valuation: Expensive Or Cheap? ~ for more details.

We Can Break Down Zynga’s Stock Price Estimate Into 4 Factors: 1. Total Revenue, 2. Net Income Margin, 3. No. of Shares, And 4. P/E Multiple

1. Zynga’s Total Revenues Could Grow 42% To $1.30 Billion In 2019. Look At Our Interactive Dashboard Analysis ~ ZNGA Revenues: How Does Zynga Make Money? ~ For A More In Depth View On The Company’s Revenues.

2. Zynga’s Adjusted Net Income Grew From $32 Million In 2016 To $210 Million In 2018, And It Will Likely Be North of $258 Million In 2019. However, Margins Are Expected To Be Lower Than 2018 In The Near Term, Due To Higher Costs Associated With Launch of New Games. The Company Has Launched New Games In 2019, And It Is Expected To Launch More New Titles In The Coming Quarters.

3. Zynga’s Adjusted EPS Has Grown From $0.04 In 2016 To $0.24 In 2018, And It Is Estimated To Be $0.27 In 2019, In Line With The Average Consensus. The Growth From 2018 Can Primarily Be Attributed To Higher Revenues.

4. Our Price Estimate of $7 For Zynga’s Stock Based On Our Detailed Valuation Model Implies A 27x Earnings Multiple On Expected 2019 Adjusted Earnings of $0.27 Per Share.

Comparing Zynga’s Historical P/E Multiple With That of Its Peers

  • These charts are based on stock price data at the end of September of each year, and reported adjusted EPS for the full year (2016-2018), and average consensus EPS for 2019.
  • The performance of individual games impact the stock prices for the gaming companies, which results in fluctuation in P/E multiples.

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