Zynga Rises As Live Features Seen Boosting Growth, Monetization

The shares of digital game maker Zynga (ZNGA) are climbing after Morgan Stanley upgraded the stock to Overweight from Equal Weight. The company’s strategy of offering new live features within games is positive, and its increased focus on cost cutting should help boost its margins, the firm stated.

LIVE FEATURES: Zynga’s strategy of adding new live features, which kicked off with its Zynga Poker game, is positive, according to Morgan Stanley analyst Brian Nowak. The additional features have already caused Zynga Poker’s user growth and monetization to accelerate, the analyst noted. Zynga will likely roll out live features for all of its games, wrote Nowak, who raised his estimates in anticipation of improved monetization in the wake of this initiative. The analyst noted that Electronic Arts (EA) and Activision (ATVI), which specialize in making video games for consoles, have seen their monetization levels rise after launching in-game features.

COST CUTTING: Zynga is taking several steps to control its costs, including launching fewer games, exercising “increased discipline” on R&D spending, and focusing its marketing and sales efforts on prolific users, the analyst stated. As a result of these changes, Nowak lowered his operating spending estimates for Zynga, and he thinks that its margins can rise.

PRICE TARGET: Nowak set a $4.50 price target on the name.

PRICE ACTION: In morning trading, Zynga rose 6.2% to $3.80. 

 

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Author: Travis Esquivel

Travis Esquivel is an engineer, passionate soccer player and full-time dad. He enjoys writing about innovation and technology from time to time.

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