Zynga’s (ZNGA) Peak Buyout to Enrich Mobile Game Portfolio

Zynga ZNGA is expanding its mobile gaming portfolio with the acquisition of Istanbul-based Peak. The company will pay $1.8 billion comprising approximately $900 million in cash and $900 million of Zynga common stock. The deal is expected to close in the third quarter of 2020.

Peak is well known for its hit franchises Toon Blast and Toy Blast that featured consistently in the top 10 and top 20 U.S. iPhone grossing games for more than two years, respectively. Toon Blast and Toy Blast, on a combined basis, have more than 12 million average mobile daily active users (DAUs).

The buyout will extend Zynga’s live service portfolio and is expected to surge mobile DAUs by more than 60%. Notably, the company had 21 million mobile DAUs at the end of first-quarter 2020.

Zynga also updated its second-quarter and 2020 guidance. Following the aforementioned news, shares of the company hit 52-week high of $9.87 on Jun 1.
 

Zynga Inc. Price and Consensus

Zynga Inc. Price and Consensus

Zynga Inc. price-consensus-chart | Zynga Inc. Quote

 

Solid Portfolio to Offset Rising Rivalry

Zynga is facing stiff competition from the likes of well-established players like Activision ATVI, Electronic Arts EA, Tencent TCEHY, NetEase and Epic Games in the gaming space.

Notably, Tencent’s PUBG Mobile and Honor of Kings were the leading mobile games in terms of revenues, globally in April, per Sensor Tower data. Moreover, Epic Games’ Fortnite surpassed the $1-billion mark in lifetime player spending on the App Store and Google Play in just over a couple of years after its release.

Moreover, both EA and Activision Blizzard have a number of popular mobile game franchises to their credit.

EA’s SimCity, FIFA, Madden NFL, Plants vs. Zombies and Star Wars gained a significant traction from gamers. Moreover, Activision’s Call of Duty Mobile and Candy Crush Saga are popular mobile games.

Nevertheless, Zynga’s enhanced portfolio is expected to strengthen its competitive edge. The addition of Peak’s games will increase the company’s “Forever Franchises” to eight. CSR Racing, Words With Friends, Zynga Poker, Empires & Puzzles, FarmVille and Merge Dragons! are some of its most popular games. The Peak takeover is also expected to boost international user base.

Zynga Updates Guidance

The company now anticipates revenues of $430 million, indicating a rise from its previous projection of $400 million provided on May 6, 2020. Adjusted EBITDA is expected to be $35 million, which is more than the previously-guided $32 million.

However, this Zacks Rank #3 (Hold) company now expects second-quarter 2020 loss of 17 cents per share, indicating a deterioration from the earlier-expected loss of 6 cents. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Moreover, for the full year, Zynga now anticipates revenues of $1.69 billion, suggesting an improvement from the past view of $1.65 billion, issued on May 6, 2020. Adjusted EBITDA is predicted to be $223 million, implying an increase from the previous forecast of $210 million.

Zynga now expects current-year loss of 36 cents per share, indicating deterioration from 25 cents of loss previously guided.

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