Barclays analyst Christopher Merwin (Equal Weight, $3 PT)
"With the stock selling off in the weeks leading up to the print, Zynga followed up with 2Q results that fell short of our estimates on bookings and EBITDA. Management also lowered its full-year outlook for bookings by 10% at the midpoint, citing timing issues from a number of previously planned releases that were moved into 2H14. The silver lining, however, is that Zynga plans to expand into the sports and runners categories through exclusive deals with the NFL, Warner Bros. and Tiger Woods. We are lowering our 3Q and 2014 EBITDA estimates to reflect updated slate as well as new costs from the licensing deal. We are maintaining our Equal Weight rating and lowering our price target to $3 from $5 to reflect the likely volatility in Zynga's near-term performance as the company ramps investment into the new franchises."
Jefferies analyst Brian Pitz (Hold, $4.50 PT)
"Results and guidance were both worse than expected as Zynga shifts key titles into 2015 including Words with Friends, Poker, and several NaturalMotion games. With new license agreements, Zynga will release new NFL, Tiger Woods golf, and Looney Tunes games, which will also contribute in 2015."
Credit Suisse analyst Stephen Ju (Underperform, $3.50 PT)
"2H14 will bring the release of five new games for Zynga and as we have noted before, the primary catalyst we are waiting for is the creation of lasting new mobile franchises as it positions itself for growth. In the meantime, Zynga lowered FY14 expectations as certain games were delayed into 2015. We maintain our Underperform rating for now but with what appears to a cadence of ~ten games set for release in any given year, we have to note that the possibility of upward revisions to estimates is increasing given the more "at bats" the company will have."
BMO Capital Markets analyst Edward Williams (Market Perform, $3.25 PT)
"The company posted Q2 results that were toward the lower end of its guidance range and lower than Street expectations - bookings and adjusted EBITDA both came in behind consensus estimates. We believe the quarter's underperformance was driven by delayed launches of new games and features, as well as a steeper decline in the company's web business. The company posted sequential growth in bookings, adjusted EBITDA, mobile bookings mix and mobile audience for the second consecutive quarter, driven by its core franchises and the mobile launch of FarmVille 2: Country Escape. User metrics were up q/q across the board. We expect declines in Q3 with delayed launches, but expect to see a
rebound in Q4. Mobile bookings surpassed web bookings for the first time. The company also announced its entry into the sports category, as well as the start of licensing brands (NFL, Tiger Woods, and Looney Tunes)."
Sterne Agee analyst Arvind Bhatia (Neutral, No PT)
2Q results were below expectations, though within management's guidance range. As suspected, game delays caused management to lower full year revenue/adjusted EBITDA guidance by ~10%/40%, respectively (at the mid-point). Some of the announced titles for 2015 are based on licenses (NFL, Tiger Woods, Looney Tunes, which means lower margins on those games. All said, the head count (~2,000) seems too high relative to the current/announced titles.
-- Written by Chris Ciaccia in New York
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