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Game Over for Zynga?

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  • Description

    Arvind Bhatia of Sterne Agee gives his outlook for Zynga earnings.

  • Duration 3:13
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Well shares of the social game maker Zynga have nose dived over the last month falling nearly 33%.

Question is has the FaceBook halo faded on this stock and should you get out.

Now we'll find out what's also bank covering the stock -- -- Bhatia associate director of resurgence Sterne Agee and then that thank you for joining us I'm just looking at the -- price targets fear the earnings estimates five cents on the EPS.

The streets is around 350 million on revenue being say 322 about a 5% increase.

What -- thoughts on the -- I think got a couple things zero won the bar for this quarter was quite low.

That 315 million that you mentioned is only -- 3% sequential increase.

-- as the prior quarter than they had a six and a half 7% increase so this street's expectations are fairly low and that we're not hard to be.

The other thing to keep in mind is towards the very end of the quarter this company bought.

This private company called ONG popped the maker of very popular mobile game called draw something.

And we think that would have added few million dollars say 45 million dollars for the last at ten days.

I'll of the quarter so as you look at that we think that -- pretty low and he got his acquisition there is no reason -- this company shouldn't at least -- beating.

-- biased -- slight amount the expectations out there's a very comfortable that our estimated I was is about the street.

While you're looking at these numbers -- they got over 284.

Million people but where -- the money come from because.

I understand this ad revenue below these people will play the games for free -- -- actually buying into the extras that come with that -- those -- popping up all the time.

-- the model is what's called a premium monologue so essentially most of the people that play these games play for free.

But a small tiny percentage -- less than 3% and I think within even that 3% there is heavy concentration of people who are paying.

But a very tiny percentage of that these people lab actually pay.

And that's the model I mean it's it's the new model.

It's not a bad model if you -- have you know 280 million people visit your site you don't need a lot of people but I think the that the valuation in this company has I think it's too high we think that the grow this company is gonna get is going to be much slower than what the market has been anticipating.

Now we think this company's margins are under pressure that had to invest a lot of money.

Us -- we don't like the stock rappers say.

But again I think -- near term my as I pointed out the quarterly fine.

-- be enough people who -- paid their money and there should be some sequential growth so very quickly at the price now at like 925930.

You believe that's a sale.

We do we -- target price says is -- range of six to eight dollars to take them -- point seven dollars we still think there is.

-- -- about a downside the other thing that people.

May not be focused on is is as follows in the next several quarters.

You're going to have a big increase Brian afloat while they are -- -- -- viruses are running out of time I'm sorry very of seeing those results coming up very -- we thank you for being here all Linda.

But -- F joining us is often talk about Zynga thank you.

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