viewZynga Inc

Brokers - Game on after Zynga's board room shuffle

The maker of games for Facebook users has appointed an industry veteran as CEO. Also featured: Goldmoney, Artis REIT

Zynga made its name with games for Facebook users

Online social gaming company Zynga's (NASDAQ:ZNGA) shuffling of directors' responsibilities makes a lot of sense to broker Wedbush.

Mark Pincus, the company's founder, will give up chief executive duties and will become executive chairman, while director Frank Gibeau, who joined the board in August of last year, steps up to become chief executive officer.

Gibeau was a big wheel at computer games colossus Electronic Arts and has a track record in the industry spanning 25 years.

The broker reckons that Gibeau, with his history of getting new games out of the door on time, will be a good fit with Pincus, who will concentrate on more strategic matters.

“Gibeau's appointment gives us increased confidence that Zynga will deliver its promised games on time and will once again grow revenues,” the broker said, as it maintained its 'out-perform' rating and $4.25 12-month price target.

“We think that there is potential for shares to appreciate above our target over the next 12 months if Zynga's management executes, as we think that the contribution margin on bookings growth can reach 55%,” Wedbush said.

Shares in Zynga were up 7.4% in pre-market trading at $2.32.

The splendidly named Goldmoney (CVE:XAU) is a speculative buy in Mackie Research's book, after the recent financing and Tuesday's release of key performance indicators for the financial service and technology group.

The broker said it had made a very modest downward adjustment to the number of users the company will add to its service, and noted that the effect on the bottom line would be more than compensated for by extracting more money from each user.

Its $7 a share price target is based on a sum-of-the-parts valuation.

“While we believe recent market and macro volatility has no doubt helped XAU, we expect the platform to gain traction in the coming months driven by more relevant functionality. XAU could launch merchant functionality in a couple months,” suggested Mackie analyst Nikhil Thadani.

“Growing traction with user transactions could enable XAU to offer a loyalty point and/or remittance program under a strategic partnership with established financial institutions as the company demonstrates filling a viable user need. We believe the company’s existing web services architecture should enable the platform to scale with relative ease. As the platform and users gain scale, we expect higher user monetization via transactions and fees,” Thadani added.

Results from real estate investment trust (REIT) Artis (TSE:AX.UN) were in line with Dundee Capital Markets' expectations, but the fundamentals of the Calgary office market remain at risk, the broker cautioned.

“As expected, according to CBRE Canadian office sector's vacancy continues to creep up from Q1/12’s relative low of 8% to 12% at the moment, the highest level since Q1/05. Obviously Calgary got hit the hardest, with an increase in office vacancy of more than 500bps [half a percentage point], pushing this market's vacancy rate above 15%,” wrote Dundee's Frederic Blondeau .

“With a development pipeline representing 9.7% of the current inventory, or almost 4 million sq. ft., we expect office fundamentals in Calgary to remain under pressure for at least the next 24 months. We would add that, according to Avison Young, Calgary’s downtown office vacancy could get above 20% in 2018,” Blondeau continued.

The analyst trimmed his 2016 estimates as a result of more conservative assumptions in terms of market fundamentals; that prompted a reduction in the 12-month target price to C$14.80 from C$15.80 previously.

The broker stuck with its neutral rating on Artis.

“Although we fully recognize the quality of the management team and the portfolio, as well as a relatively compelling valuation, in our opinion the exposure to Alberta commercial real estate, especially the Province's Office market, continues to represent a significant risk,” it concluded.





Quick facts: Zynga Inc

Price: 9.82 USD

Market: NASDAQ
Market Cap: $10.54 billion

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