A SunTrust analyst initiated coverage of online/mobile gaming company Zynga with a buy rating.
Analyst Matthew Thornton said in a note to investors that Zynga offers “ pure-play exposure to the large and fast growing global mobile game market" on the back of its growing and diversified gaming portfolio and highly experienced management team and Board.
Thornton also mentioned Zynga’s pipeline of at least 7 games, including FarmVille, Harry Potter, Star Wars, Game of Thrones, and others, as well as a strong balance sheet including more than $1.4b in cash as major strengths of the company. The analysts also cited Zynga’s acquisitions (e.g. Small Giant, Gram Games) which he believes should augment organic growth with M&A in what he mentions is a highly fragmented market,"
"Our own conversations with private mobile game publishers suggest to us that a sale to Zynga (under the current team) is generally viewed as a desirable outcome," Thornton said. However, he also mentioned rising user acquisition costs as a potential risk to the company.
Thornton has a $7.50 per share price target on Zynga shares.