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Pamela Peerce-Landers

 
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  • Glu +1.5% AH after King partly blames Kardashian game for woes [View news story]
    I listened to the call and did not hear anything about Glu or Kim Kardashian. The only specific external factor mentioned was the World Cup.
    Aug 12 06:58 PM | 1 Like Like |Link to Comment
  • 10 Things You Should Know About King Digital [View article]
    Market overreaction.
    Aug 12 05:33 PM | Likes Like |Link to Comment
  • Valuation: Why Zynga's Stock Is Worth Less Than $2 [View article]
    Sorry, forgot the link

    http://seekingalpha.co...

    Pam
    Aug 8 12:34 PM | Likes Like |Link to Comment
  • Valuation: Why Zynga's Stock Is Worth Less Than $2 [View article]
    Ex-Fed,

    King is not a one-hit wonder. See the follow article which provides stats for King's, Glu's and Zynga's top 3-4 grossing games as of Jan 1, the end of Q1, Q2 and, I believe July 22 ( latest data when I wrote the article).

    Zynga got 56% of its Q2 revenue from two games--FarmVille 2 and Zynga Poker.

    As of Q1, King got around 63% of its sales from CC, but that figure dropped vs. Q4 2013 as other games brought in more money. I expect that trend continued in Q2.

    King reports on Aug 12.

    Best,

    Pam
    Aug 8 12:33 PM | Likes Like |Link to Comment
  • Valuation: Why Zynga's Stock Is Worth Less Than $2 [View article]
    Tales from The Future,

    Thanks. I listened to Zynga's CC yesterday and am planning an article based on it.

    Pam
    Aug 8 07:08 AM | 2 Likes Like |Link to Comment
  • 10 Things You Should Know About King Digital [View article]
    jzmagic,

    As of the writing of the following article, July 25, King had 4 games in the top 10 grossing on Google Play, 3 on the iPad and 3 on the iPhone in the US.

    http://seekingalpha.co...

    It is the only game company with such a record. FYI, the article also provides stats for competitors Zynga and Glu Mobile.

    Pam
    Aug 4 11:17 AM | 1 Like Like |Link to Comment
  • Valuation: Why Zynga's Stock Is Worth Less Than $2 [View article]
    I missed your original comment, but did answer it in part below. For those interested, King's Q1 results were still on track to support a valuation of $16.2 to $18 billion. The discrepancy is in per share metric. At the time of my pre-IPO analysis, I expected King to have 126.8 million shares outstanding after the IPO. Shares outstanding are now 314.9. So, the per share value is $51.40 to $57.20.

    I will be updating my valuation following King's CC on August 12.

    Pam
    Aug 3 01:35 PM | 1 Like Like |Link to Comment
  • Valuation: Why Zynga's Stock Is Worth Less Than $2 [View article]
    grandhiker,

    What is the question?

    Pam
    Aug 3 01:26 PM | Likes Like |Link to Comment
  • Valuation: Why Zynga's Stock Is Worth Less Than $2 [View article]
    Nosynq,

    If you can quantify your expectations, you can use DCF to value a company.

    What a company is worth is not the same as its market price. A lot of good news could propel ZNGA to your $6 price target. Just look at Glu's doubling in price over a 4 week period on the excitement about Kim Kardashian: Hollywood.

    To be worth $6 would require years of 50% year over year sales growth. Possible, but unlikely IMO.

    Best,

    Pam
    Aug 3 01:23 PM | Likes Like |Link to Comment
  • Valuation: Why Zynga's Stock Is Worth Less Than $2 [View article]
    Marina,

    A $1.80 valuation is a consequence of the growth drivers I used. (While share price is a convenient metric, it is better to keep in mind the equity value of $1.6 billion since the denominator, the number of shares can change.)

    That said, will the market allow Zynga drop to $1.80 is what I think you are saying.

    I don't know. At any time, there are stocks which are overpriced and underpriced. Some companies seem to get a pass when they disappoint and others are hammered. In my experience, if the market believes that a company has significant sales growth potential, it tends to be more forgiving.

    The market obviously believes that Zynga has more potential than I do, so I would not expect a big dump in the near future.

    In some sense, you could regard my valuation as a floor. While it does require improvements in Zynga's sales, margin and sales-to-capital ratio, the present value of the cash flows or operating assets is only $594 million. The balance of the value comes from its non-operating assets--cash, short-term and long-term marketable securities less the value of its options and the debt obligation of its operating leases. The liquidation value of its operating assets may exceed $594 million.

    To give you an idea of what is baked into the current market value of $2.54 billion, by my analysis, annual sales growth of over 27% for each of the next 4 years--2015 through 2018, followed by healthy, albeit falling sales growth for the next 5 years and growth at the rate of the US economy thereafter. An adjusted operating margin of 12.9% and improvement in the sales-to-capital ratio. 27% growth for 4 years translates to 160% increase in sales--not shabby.

    Of course, Zynga can be worth more than the current share price if can grow sales even more, increase its adjusted operating margin to 25.8% and its sales-to-capital ratio to 2.

    In the end, it will sell for what the market is willing to pay. And if it becomes attractive to a buyer, its market cap could exceed its fair value based on a cash flow analysis.

    Best,

    Pam
    Aug 3 12:29 PM | 1 Like Like |Link to Comment
  • Valuation: Why Zynga's Stock Is Worth Less Than $2 [View article]
    A timely piece about taking an unpopular view:

    http://seekingalpha.co...

    Pam
    Aug 3 10:52 AM | 1 Like Like |Link to Comment
  • Valuation: Why Zynga's Stock Is Worth Less Than $2 [View article]
    News on 3 ex-Zynga developers who started their own company. The CEO, Michael Martinez, was the senior product mgr. for Zynga Poker and the FarmVille series.

    http://bit.ly/1uXgrPq

    This is why I am concerned about Zynga's loss of talent.

    Even the best management has to work from a base of what is left. Mattrick and his team can foster an innovative work environment and cut expenses, but they are still dependent on the developing talent they have left and can attract.

    Attracting talent to join a turnaround may be difficult when candidates are offered jobs with new ventures or more successful companies.

    Pam
    Aug 3 10:47 AM | 1 Like Like |Link to Comment
  • Valuation: Why Zynga's Stock Is Worth Less Than $2 [View article]
    Shawn,

    Well said.

    In response,

    1. My expectations for Zynga's future are tempered by its past, true. Especially the damage done by Pincus to its talent pool.

    2. I did factor it Mattrick's impact in 3 ways: increasing sales vs. the unrelenting decline since 2012 under Pincus; greatly improved operating margin and a doubling of sales generated based on capital expended.

    3. I did factor in NM by increasing mobile sales growth above Zynga's 11% growth rate.

    If Mattrick can exceed my estimates for these 3 growth factors, then Zynga's stock would be more valuable. I think my target operating margin and sales-to-capital ratio are both challenging. My sales growth target is maybe less challenging.

    When I do any valuation, especially on a turnaround, I try to decide what reasonable growth can be achieved in sales, operating margin and sales-to-capital ratio. Examination of the past provides a framework.

    Best,

    Pam
    Aug 3 09:58 AM | 1 Like Like |Link to Comment
  • Valuation: Why Zynga's Stock Is Worth Less Than $2 [View article]
    haleiwahu,

    The stock started that move up in January after the acquisition of NaturalMotion was announced. Why it did not stay above $5? Could be the lack of followup news on the merger. In my experience, big pops on news like this tend to be temporary unless it is followed by more info solidifying how the company is benefiting. I don't think the drop was anything more.

    Best,

    Pam
    Aug 3 09:37 AM | Likes Like |Link to Comment
  • Valuation: Why Zynga's Stock Is Worth Less Than $2 [View article]
    z06,

    1. While anyone reading your comment knows little about you, not even your real name, I have a full profile available for anyone to read.
    2. My "agenda" is always the same--to inform based on my research.
    3. SA requires that its authors disclose any personal positions and whether or not they are being compensated for their article. That info is at the bottom of every article.

    Now, even though we know nothing about you, SA allows you to post a comment which can be read by anyone who reads this article. So, you get the same exposure and get to reveal nothing.

    Finally, my statement about Zynga's hopes was based on its stock chart and the market's reaction to two pieces of news: Mattrick being hired last year and the acquisition of NM this January. In both cases, the stock popped. Hence, I concluded the market regarded these two developments as very important to the company's future.

    Best,

    Pam
    Aug 3 09:29 AM | 4 Likes Like |Link to Comment
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