Zynga will overcome 'misplaced and misguided' pessimism - analyst

Wedbush Securities analyst Michael Pachter believes that social games giant Zynga will overcome its recent user declines and rebound to a strong financial performance in the second half of the current fiscal year. Zynga's share price has gradually fallen since the company launched its IPO late last year, and earlier this month fell to less than half the value that it was originally priced at. However, Pachter says that the share price should now increase thanks to increased spending on key older franchises and a slew of new releases, while adding that shareholder pessimism is "misplaced and misguided." He notes that Zynga's shares have been negatively impacted by the decline in monthly active users, as investors appear to believe that the MAU count correlates directly to revenue growth. "We disagree," he says, "and believe that the majority of gamers who discontinue playing Zynga titles are likely to be non-payers, with payers spending more as they make a greater investment of time in each game." The average spending user on Facebook takes around 6-9 months before they begin purchasing Facebook credits, believes Pachter, meaning that while MAUs may peak and being to drop, revenues from a game can still grow. Zynga is still the company with the largest social gaming audience on Facebook, he adds, with around five times as many MAUs as its next closest competitor, hence it should not be written off so easily.