Zynga Shares Continue to Impress in 2018



Zynga’s stock performance

Shares of online gaming company Zynga (ZNGA) rose over 27% in May and closed at $4.40. The stock is currently trading at $4.47, which is 40% higher than its 52-week low of $3.2 and 2% lower than its 52-week high of $4.56.

Zynga has generated a return of 25% in the last 12 months after rising 56% in 2017.

Focus on profitability

Zynga’s EBITDA margin was ~17.2% at the end of Q1 2018, significantly higher than its margin of 6% in Q1 2016. The company’s stock price soared after its management stated that it was on track to meet its near-term of EBITDA margin of 20%.

Zynga’s EPS are estimated to improve from -$0.02 in 2015 and $0.10 in 2017 to $0.14 in 2018 and $0.19 in 2019. Zynga has managed to improve its profit margins significantly over the last few quarters, resulting in an impressive rally in its shares.

Zynga shares were also affected after it announced its acquisition of Gram Games for $250 million, a move that’s expected to drive its profit margins higher. According to Michael Pachter, an analyst at Wedbush, the Gram Games acquisition is expected to contribute $12 million to Zynga’s EBITDA in 2018 and $20 million in 2019.

Shares of peer gaming companies such as Take-Two Interactive (TTWO), Activision Blizzard (ATVI), and Electronic Arts (EA) generated returns of 12.4%, 6.9%, and 11%, respectively, in May.

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