With a once per month active user audience of about 230 million just on Facebook, Zynga is'one of the largest developers of social entertainment widgets and games,' asserts the report from Next Up! Research and SharesPost, a web service for trading shares of private firms.
Thanks to predicted compound annual growth of 35 percent until 2014, the analysts reckoned Zynga's value at $2.8 billion to $3.3 billion with a projected share cost of $14.97 to $17.68. ( there's been rumblings that Zynga is balanced to go public. )
The report notes that five Zynga games - FarmVille, Cafe World, Texas HoldEm Poker, FishVille and Mafia Wars - rank among the top ten Facebook apps. And Zynga has a significant presence on sites such as MySpace, Bebo, Friendster, Tagged, Yahoo and iPhone.
Analyst Michael Pachter with Wedbush Morgan stocks claims that although nobody but Zynga knows enough about the company's revenue, margins and expansion path to have an informed opinion about what the company is worth' he considers it' reasonable to believe a high price for the company.'
A $3.3 billion valuation, he says,'would suggest viable money flow of $200 million or more. Clearly, Zynga isn't there yet, as their revenues are likely only a little above that level, and they incur costs to generate those earnings. Yet, it is of course possible to come up with that worth if the company can show a path to $200 million in annual money flow, or higher. If we agree that Zynga will have much higher money in a few years ( very likely ), and say that the incremental margin on revenue expansion is really high ( also very probable ), it's not difficult to see how they could get to $200 million in free money flow at a pragmatic $500 million revenue level, and how they could get there in one or two years.'
The report projects earnings of $460 million this year, increasing to $1.1 bill in 2014.
Other notes from the report :
Zynga's user base has increased from 30,000,000 in April 2009 to 228 million in Jan 2010.
Only 2% or 3 p.c. of users spend money on Zynga games and less than one percent habitually purchase virtual products. Zynga makes virtually forty percent of its cash from those sales. Other revenue sources include in-game advertisements and promoting offers.
Impending Facebook changes could affect Zynga's apps. Next month, Facebook is anticipated to adjust its notification policy for games, something that could affect Zynga in unintended ways.' The report notes a Facebook change in July 2008 that turned off viral components for the Super Wall application. As a consequence, average daily users fell from 2.4 million to 0.6 million in a month. Now, Super Wall users number 0.3 million median daily users.
Next Up! Research made reports in November with its analysis of Twitter, guesstimating it at perhaps half that of its commonly held $1.1 billion valuation. Next Up! Also guestimated Facebook at roughly $5 billion-to-$6.5 billion, compared to some guesses of up to $14 bill.
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