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Zynga Rises as Analysts Laud Results, Plan for Ad-Tech Purchase

Zynga traded higher after Wall Street lauded the game developer's first-quarter results and push into advertising with the Chartboost acquisition.

Shares of Zynga  (ZNGA)  were rising after the mobile videogame publisher reported better-than-expected first-quarter results and disclosed plans to buy the ad-technology company Chartboost for $250 million.

The San Francisco company received analyst upgrades and price-target boosts from Bank of America and Morgan Stanley.

Zynga shares at last check rose 2.9% to $10.43.

For the first quarter Zynga narrowed its net loss to $23 million, or 2 cents a share, from $103.9 million, or 11 cents a share, in the year-earlier period. The latest result was stronger than the FactSet consensus estimate of a loss of 4 cents a share.

Revenue rose 68% to $680.3 million. 

The game developer reported first-quarter bookings of $720 million.

Zynga’s move to diversify its business away from pure videogame publishing raises the upside potential for the stock, Bank of America said in a note to clients on Thursday.

Bank of America analyst Ryan Gee upgraded the stock to buy from neutral. "The results were strong and show sustainable double-digit organic growth. Zynga is in a better position now than at any point in its history on mobile," Gee wrote.

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The company’s pivot toward higher-growth and higher-margin ad technology “is progressing far sooner than expected and enhances the value of ZNGA’s network," he added.

Bank of America raised its price target on the stock to $13.50 from $12.

Morgan Stanley, which has an overweight rating on the stock, said Zynga's results and outlook “speak to the momentum across the portfolio,” while the Chartboost acquisition “creates an opportunity to structurally improve ZNGA’s business.”

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Morgan Stanley raised its price target on the stock to $14 from $13.

Analysts at Baird said the results show continued strength in live services, while the Chartboost deal “turns Zynga into an ad network as well as boosts internal ad tech." 

ZNGA should fare better than other forms of entertainment or media as the economy reopens, according to Baird.

Baird has an outperform rating with a price target of $14 on Zynga.