Baird raises Zynga to outperform

Reuters News
Posted: Jun 11, 2012 3:02 PM
Baird raises Zynga to outperform

(Reuters) - Robert W. Baird raised Zynga Inc to "outperform" from "neutral," saying the social gaming company will benefit from the launch of new games this summer and its expansion into mobile devices.

"This summer, we believe that Zynga will announce a new game slate, including 'mid-core' titles that should appeal to a broader audience of gamers, as well as sequels to existing franchises, such as Farmville," analyst Colin Sebastian wrote in a research report.

Facebook Inc's recent shift in focus towards mobile platforms should also allow Zynga to gain traction on smart devices and it can also benefit from its expertise in social and free-to-play games, analyst Sebastian said.

Zynga shares have lost more than half of their market value in the last three months on concerns of slowing growth in social games and usage declines in key game franchises.

Zynga, which went public in December, owns the popular Farmville and Cityville games and depends on the Facebook platform to earn almost all of its revenue. Zynga's heavy dependence on Facebook has been a constant worry for investors.

The stock got hammered after Facebook went public in a disappointing debut early this month.

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"While Zynga's dependence on Facebook is a cause for some concern amid slowing growth in social games, we believe Zynga's relationship with Facebook still provides a unique competitive advantage," Sebastian said.

He said the headwinds were largely priced into Zynga's shares.

Zynga shares rose 3 percent to $6.06 in early trading on Thursday on the Nasdaq.

(Reporting by Supantha Mukherjee in Bangalore; Editing by Maju Samuel)