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Zynga: Market Missed Bookings Boost

As part of the announcement regarding the acquisition of Small Giant Games for $560 million, Zynga (ZNGA) increased bookings guidance for Q4. The mobile-game developer now expects to reach $260 million in bookings during the quarter prior to closing the deal.

Zynga increased bookings by a solid $10 million due to strong revenues from Words With Friends, CSR2 and the recently bought Merge Dragons!. The stock hasn't rebounded following the dip despite the constant billings growth.

At about $3.60, the stock has a market cap of $3.45 billion. The deal for Small Giant Games finally includes a $330 million cash payment that eliminates what was a significantly large cash balance. The stock will now be based solely on bookings growth.

Even before this deal, analysts were pushing Zynga bookings totals up to $1.2 billion next year. The stock is rather cheap at only 3x a bookings level that is going to surge with the acquisition of Empires & Puzzles. The Match-3 battle game has regularly made the top 10 in both the Google Play Store and Apple App Store.

The stock is set to surge as bookings grow both due organic growth and the recent purchases.

Disclosure: Long ZNGA. Please review the disclaimer page for more details. 


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