[ad_1]
Text size
Zynga Headquarters in San Francisco.
Justin Sullivan / Getty Images
Zynga
shares rally on Tuesday, a day after video game publisher Electronic Arts said it was buying
Glu Mobile
for $ 2.4 billion.
Zynga
the stock was up 3.1% to $ 11.36 in the afternoon session.
With Glu (ticker: GLUU) nearly sold to EA (EA), it’s possible that investors are considering the 36% premium that EA agreed to pay for Glu and what that could mean if rival mobile publisher Zynga (ZNGA ) became an acquisition target.
With EA likely out of place as a potential suitor – although the company has $ 6.7 billion in cash and cash equivalents, according to Bloomberg data, and little debt – Zynga could be courted by companies such as
Take-Two interactive software
(TTWO),
Activision Blizzard
(ATVI), or
Ubisoft Entertainment
(UBI.France).
Still, Zynga is a considerably larger company than Glu, with a market value of $ 12.29 billion, according to Bloomberg data. It is expected to generate adjusted profit of $ 380.9 million on sales of $ 2.25 billion this year.
Here has Barron’s, we love Zynga stock and have already posted a positive story about its upside potential, saying the company is well positioned for growth in the large mobile gaming market. Stocks are up 26% since our October 30 story, with the S&P 500 Index gaining 20%.
Here’s how several potential Zynga acquirers in the video game industry stack up:
Take-Two Interactive
Take-Two has $ 2.42 billion in cash and cash equivalents, and only $ 187.4 million in debt. Its relatively low debt load and free cash flow of $ 974.6 million suggest it could increase debt to pay for an acquisition, especially with historically low interest rates. But Take-Two acquired mobile developer Playdots for $ 192 million in cash last year, and Social Point for $ 250 million in 2017. In his fiscal third quarter call, Take-Two chairman Karl Slatoff, said these two acquisitions gave Take-Two an “important platform” in mobile games.
Activision
Rival Activision has a more substantial war chest of $ 8.64 billion, but also carries a higher debt of $ 3.61 billion, according to Bloomberg data. With free cash flow of $ 2.17 billion, Activision could likely afford to buy Zynga. But would he want it?
Activision already has a large mobile video game division from King, which it bought for $ 5.9 billion in 2016. King has announced reservations of $ 2.16 billion for 2020, and Activision has seen notable success with his Call of Duty mobile title, suggesting that he could look to his own franchises and expertise to develop this side of the business.
Ubisoft
Ubisoft is in the weakest financial position to buy Zynga, with $ 1.28 billion in cash and total debt of $ 1.72 billion, according to Bloomberg data. Its free cash flow stood at $ 513.3 million and mobile bookings represented 5% of the company’s fiscal third quarter, which it reported on Tuesday morning. In the past nine months, mobile bookings accounted for 8% of revenue.
On Tuesday, Ubisoft executives didn’t seem too interested in a mobile acquisition. The company said it is working in partnership with the Chinese internet giant
Tencent Holdings
on a mobile title, and plans to create high-end games based on existing franchises and brands, similar to Activision.
Ask by Barron’s if it was for sale, Zynga replied, “We don’t comment on speculation.”
Zynga is expected to release its results on Wednesday after the closing bell. The consensus estimate of adjusted earnings per share for the fourth quarter is 8 cents, on sales of $ 679 million. The call for results could provide insight into the possibility of a sale.
Write to Max A. Cherney at [email protected]
[ad_2]
Source link