Has Zynga stock, which has dropped since its $10 IPO price in December, lost its Zing? One analyst doesn’t think so.
“Well, I think, in general, there’s huge growth potential here,” said Michael Olson, a Piper Jaffray senior research analyst. “Social gaming is a space that we believe in, and there’s a lot of different investors investing a lot of money in this space, and I think Zynga is clearly the leader.”
On Monday, Olson initiated coverage on the company, with an overweight rating and a $11 price target.
He added that Zynga, which makes games such as FarmVille and Words with Friends, has the scale necessary to continue to invest in research and development to get more games pumped out.
“It’s not like the console gaming space where we see Call of Duty (from Activision ) come out and then it has legs for the next 12 months,” Olson said. “These games are shorter life cycles, so you have to have the scale to keep pumping new games out into the market.”
Zynga will likely focus more on the mobile space as it ultimately tries to expand beyond the Facebook platform in its pipeline of upcoming games, he added.
Michael Olson does not own Zynga stock. Piper Jaffray makes a market in these securities and will buy and sell the securities on a principal basis.
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