PS: I don't usually pitch stock picks, but when I do they better be good ;)
Healthy technical correction highlights new entry opportunity for Zynga Inc (ZNGA US)
Couple interesting headlines to watch:
1. Reid Hoffman, Mark Pincus, And Michael Thompson Looking To Raise $600 Million For SPAC - Reinvent Technology Partners (RTP/U US)
2. Unusually skewed option on calls vs puts
3. Acquisition of Peak to finalize in Q3 of 2020
4. Acquisition of Rollic to close on October 1, 2020
ZNGA: (highlighting some comments mentioned in their earning calls, for more details refer to their official web)
Similar to other gaming industry like ATVI/EA/ TTWO, ZNGA benefited from Covid (forced to stay home), "we saw a heightened level of player engagement, social connection, and monetization in our portfolio. Increased player engagement in our live services drove our exceptional Q2 results including record revenue and bookings performances and our best operating cash flow in more than 8 years. Our new game pipeline is also progressing well and we expect to begin releasing new titles later this year. Today, we are raising our full-year 2020 revenue and bookings guidance."
ZNGA acquired an 80% share in hypercasual mobile studio Rollic for $168 million. Rollic's games see more than 5 million daily active users and over 65 million monthly active users. "We are meaningfully expanding our entry into hypercasual, one of the largest and fastest growing game categories on mobile, while adding a highly talented team and an extensive network of external developers to Zynga." "The growth of this category is fueled by advertising driven games that are highly accessible and appeal to a broad audience globally. With more than 5 million mobile DAUs and 65 million mobile MAUs, we expect Rollic to meaningfully increase our audience and expand and diversify our advertising business."
"In addition, we are driving strong growth in international markets with Q2 revenue in bookings up 56% and 34% year-over-year respectively. And Android revenue in bookings up 61% and 43% year-over-year. With Toon Blast and Toy Blast, we will further increase our international business, especially in Japan."
"I (Frank Gibeau) think it's really going to start to accelerate when Rollic becomes part of the advertising network in Q4, when we see a sizable increase in MAUs in addition to a diversification of the demos and also regions that we can advertise into. "
*Tons of increase in deferred revenue and hypercasual game mode
Q3 Guidance
•Revenue of $445 million
•Net increase in deferred revenue of $175 million
•Bookings of $620 million
•Net loss of $160 million
•Adjusted EBITDA loss of $45 million
2020 & Beyond
• Revenue of $1.8 billion
• Net increase in deferred revenue of $400 million
• Bookings of $2.2 billion
• Net loss of $550 million
• Adjusted EBITDA of $85 million
***Something worth noting:
Qns: "And then you obviously noted, looks like you guys want to continue to find success in M&A. Is hpyercasual sort of the new genre or platform you're going to continue to build on an M&A and how robust is that market for future?"
Ans: "Yeah, I know Mike, I think it's a great point that the talent base in mobile is global and it's -- there's a lot of supply of great companies out there, big, small in different categories, in different regions of the world. So, consolidation is obviously underway in the interactive category, we're actively participating in growth through finding partnerships with companies out there. "
These brings back to Reinvent Technology company pending listing.
Healthy technical correction highlights new entry opportunity for Zynga Inc (ZNGA US)
Couple interesting headlines to watch:
1. Reid Hoffman, Mark Pincus, And Michael Thompson Looking To Raise $600 Million For SPAC - Reinvent Technology Partners (RTP/U US)
2. Unusually skewed option on calls vs puts
3. Acquisition of Peak to finalize in Q3 of 2020
4. Acquisition of Rollic to close on October 1, 2020
ZNGA: (highlighting some comments mentioned in their earning calls, for more details refer to their official web)
Similar to other gaming industry like ATVI/EA/ TTWO, ZNGA benefited from Covid (forced to stay home), "we saw a heightened level of player engagement, social connection, and monetization in our portfolio. Increased player engagement in our live services drove our exceptional Q2 results including record revenue and bookings performances and our best operating cash flow in more than 8 years. Our new game pipeline is also progressing well and we expect to begin releasing new titles later this year. Today, we are raising our full-year 2020 revenue and bookings guidance."
ZNGA acquired an 80% share in hypercasual mobile studio Rollic for $168 million. Rollic's games see more than 5 million daily active users and over 65 million monthly active users. "We are meaningfully expanding our entry into hypercasual, one of the largest and fastest growing game categories on mobile, while adding a highly talented team and an extensive network of external developers to Zynga." "The growth of this category is fueled by advertising driven games that are highly accessible and appeal to a broad audience globally. With more than 5 million mobile DAUs and 65 million mobile MAUs, we expect Rollic to meaningfully increase our audience and expand and diversify our advertising business."
"In addition, we are driving strong growth in international markets with Q2 revenue in bookings up 56% and 34% year-over-year respectively. And Android revenue in bookings up 61% and 43% year-over-year. With Toon Blast and Toy Blast, we will further increase our international business, especially in Japan."
"I (Frank Gibeau) think it's really going to start to accelerate when Rollic becomes part of the advertising network in Q4, when we see a sizable increase in MAUs in addition to a diversification of the demos and also regions that we can advertise into. "
*Tons of increase in deferred revenue and hypercasual game mode
Q3 Guidance
•Revenue of $445 million
•Net increase in deferred revenue of $175 million
•Bookings of $620 million
•Net loss of $160 million
•Adjusted EBITDA loss of $45 million
2020 & Beyond
• Revenue of $1.8 billion
• Net increase in deferred revenue of $400 million
• Bookings of $2.2 billion
• Net loss of $550 million
• Adjusted EBITDA of $85 million
***Something worth noting:
Qns: "And then you obviously noted, looks like you guys want to continue to find success in M&A. Is hpyercasual sort of the new genre or platform you're going to continue to build on an M&A and how robust is that market for future?"
Ans: "Yeah, I know Mike, I think it's a great point that the talent base in mobile is global and it's -- there's a lot of supply of great companies out there, big, small in different categories, in different regions of the world. So, consolidation is obviously underway in the interactive category, we're actively participating in growth through finding partnerships with companies out there. "
These brings back to Reinvent Technology company pending listing.
Zynga: Remains at #1 Following Peak Acquisition
Zynga's aggregate share remained unchanged at #1 in August, including revenue from the Peak Games acquisition in July. Across platforms, Zynga’s ranks remained unchanged on iPhone (#1) and Google Play (#1) and fell one spot on iPad (#1 to #2). On iPhone/U.S.,Zynga’s Toon Blast (now owned through the Peak Games acquisition) rose three spots from#12 to #9.
*iPad: no titles in top 20, unchanged m/m; #2 publisher, fell from #1 last month. Others remain #1 ranking
Comparing against Tencent ratios EV/S avg 6.8x, P/E 39.9x
vs Znga ratios EV/S avg 4.6x, P/E 28.8x
You may try out their game Toon Blast and let me know if you like their game-play and if you might spend on it!