Zynga Inc (NASDAQ:ZNGA) has reached a new 52 week high at $3.62, with the new ratings upgrade given by Piper Jaffray. The increased their target price to $4 showing optimism with Zynga’s new management. They have decreased their losses by 75% this quarter alone (last quarter loss for 2016 was $35 million while Q1 of 2017 went down to 9.5 million) and have increased their revenues from 2016 Q4 $186.7 million to 2017 Q1 of $194.3 million. This improving trajectory for their financial is doing wonders. Infact, Frank Gibeau, Zynga CEO, said in the 2017 earnings call transcript:
Frank D. Gibeau – Zynga Inc (NASDAQ:ZNGA)
“Good afternoon, and thank you for joining our call. We’re off to a strong start in 2017. We delivered a great quarter beating guidance on all key financial measures. Our strategy of growing our live services while sharpening our operating model is really paying off.
Over the past 12 months, we significantly improved the fundamentals of the company. We’ve seen a marked improvement in profitability, cash flow, revenue and bookings, all of which are the strongest we delivered in years.
We’re pleased with Zynga’s momentum and how our turnaround is pacing. This past quarter, revenue was $194.3 million, up 4% year-over-year and bookings were $207.4 million, up 14% year-over-year. This growth was driven by the best mobile performance in Zynga’s history with mobile revenue up 19% and mobile bookings up 27%.”
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“Our payer conversion rates have also increased, up 36% year-over-year. There were three key drivers to our Q1 performance. First, our mobile growth. Second, the strength of our live operations and third, our improved operating efficiency.
Starting with mobile growth, in addition to our record-breaking revenue and bookings, our mobile audience grew 16% year-over-year to 18 million DAU, the highest we’ve seen in two years. I’m most encouraged by the growth of mobile in-app purchase revenue and bookings, which were up 31% and 40% respectively year-over-year, the best in company history.”
An interesting take away from this is the technical measures, specifically the daily unique users and unique payers. While most companies focus in ad revenue, some game companies’ growth trajectory is more clearly seen thru in-game purchases. Zynga is showing impressive growth, considering the video game industry metrics. For 2016 , they have 1 million unique payers while for just Q1 2017, it grew by 30% to 1.3 million. Daily average users grew from 19 million to 21 million and monthly users from 68 million to 72 million.
Zynga has also started to reach out to get a bigger global market share for games. The company has also partnered with China’s NetEase to publish their mobile game Dawn of Titans. The Chinese mobile gaming market is immensely huge; it is expected to be worth $8.3 billion in 2017 alone.
Another interesting number to take note of: China’s iPhone gamers alone spend almost double to that of United States players. Monthly Average Revenue Per User is $25 for china while USA is $13. Taking just a part of the juicy Chinese market would do wonders for Zynga.
They also have entered into a lease agreement with Airbnb for 250,000 square feet. This could give them an additional $15 million per year. This was on the newswire just May 8,2107 and should be able to give them higher revenue for their Q2 report, which may push the stock higher and nearer to the Pipper Jaffray target price of $4. They are also swimming in a pool of money; Zynga still has a war chest of $720 million.
Currently, ZNGA is at RSI 71, showing possible overbought levels. With the stock just reaching new resistance at the new 52 week high of 3.62, it may be better to wait for the price to stabilize and buy on weakness. ZNGA is growing in a good trajectory. If this performance keeps up, we may see the $4 target price earlier than anticipated. For more news on ZNGA and other fast-moving stocks, please subscribe to FinanceRegistrar.com below.