Zynga Shares Forecast August 2021 – Time to buy ZNGA?

Shares of American social game developer Zynga (NASDAQ: ZNGA) are in the green right now, trading around the $9 mark. Zynga has been one of the best performing video game stocks over the last half-decade. It is a company with a massive global reach across 175 countries and regions in spite of being a small company ranging in the $90 billion mobile market. Many investors are thinking about whether this is the right time to pick up ZNGA shares.

Zynga – Technical Analysis

Zynga’s financial statement indicates a market cap of $9.565 billion with total assets worth $6.132 billion. Revenue for 2020 was at $1.97 billion with a profit margin of -21.74%, compared to $1.32 billion in 2019.

Moving averages for Zynga such as Exponential Moving Average (100)(9.85), Simple Moving Average (100)(10.17), Exponential Moving Average (200)(9.80) and Simple Moving Average (200)(10.01) are pointing towards a sell action. Oscillators such as Relative Strength Index (14)(43.57), Stochastic %K (14, 3, 3)(68.69), Commodity Channel Index (20)(2.54) and Average Directional Index (14)(37.07) are neutral.

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Recent Developments

The management of the company has released statements claiming that the reopening of the economy and Apple’s privacy changes are contributors to its less than satisfactory performance. The company experienced fewer bookings in May compared to earlier months as the pandemic restrictions are slowly decreasing and people are starting to get out more. The company is facing increased costs for player acquisition as a result of Apple’s new privacy policy. It states that users can now grant permission to developers for tracking or accessing their device’s advertising identifier.

The ease of restrictions mainly had an impact on recent player acquisitions that only started playing with the company’s games in 2021. Their underlying loyal fan base is still deeply invested in Zynga’s games and has contributed to the company’s bookings.  The company has several growth initiatives in the pipeline, including game releases to drive “meaningful” organic growth in 2022 such as FarmVille 3 and Star Wars: Hunters.

Should You Buy ZNGA Shares?

Investors interested in ZNGA shares have to look at the company’s recent activity, which includes some acquisitions. For instance, Zynga acquired Rollic last year, which has recently registered 1 billion total downloads worldwide. This has contributed to the company’s growth in the hyper-casual gaming market, advertising, and international expansion. It has also acquired Chartboost which has an audience of 700 million monthly users on its advertising and monetization platform. The company has also made expansionist moves in China by acquiring StarLark, the maker of the popular Golf Rival title, for $525 million.

Apart from this, the company’s financials are also positive, with a 36% year-over-year growth in international bookings last quarter. It is building a robust platform that extends its international reach.  The price to sales ratio of the shares has decreased from 6 in 2020 to 3.9 currently. Even though the company performed strongly in Q2, it wasn’t enough to stop share prices from falling. Investors are collectively concerned about the company’s future ability to consistently deliver such high numbers. The news of the recent acquisition is expected to have a dilutive impact on the shares, resulting in an increase in expenses in the near term. Projections by the company revealed that it will incur a loss of $110 million. It will be best to wait and see if the shares decline any further before buying them.

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