Is Zynga a Buy?

No. But it’s no longer overly expensive either.

Eric Savitz notes that some analysts are starting to pound the tables for Zynga (ZNGA). For example, Richard Greenfield at BTIG writes:

In recent weeks, Zynga has been trading as if it is going out of business, despite the fact that the company is free cash flow positive and has net cash of over $2/share. Investors simply do not believe Zynga online gaming is a sustainable business, especially Facebook-based gaming, which is now hated by investors. We estimate Zynga is currently trading at 6.7x current year EV/EBITDA and 4.4x our estimated 2013 EBITDA, with a 2013 free cash flow multiple of just over 9x and just over 5x excluding cash on hand (2012 FCF is burdened by acquiring Zynga’s office building, a one-time hit to cap/ex).

The World’s Simplest Stock Value Tool puts ZNGA at $7.09. The stock is currently at $5.17. That’s a 27% discount but given that it’s still so new, I’d want to see a larger discount.

Posted by on June 13th, 2012 at 10:09 am


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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