Zynga Shares Take Off on UBS Upgrade to 'Buy'

By MarketsFOXBusiness

Shares of Zynga (NADSAQ:ZNGA) soared more than 7% to fresh 52-week highs on Tuesday morning after UBS (NYSE:UBS) upgraded the mobile games maker to “buy” on “renewed growth and margins.”

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The brokerage, which raised its outlook from “neutral” and raised its price target on the “Farmville”   maker’s stock to $6 from $4, said the upgrade is a reflection of its confidence that Zynga’s core operations have begun to stabilize under new CEO Don Mattrick.

The analysts also believe the $527 million NaturalMotion buy announced last week will produce a “greater level of scale and innovation” to Zynga’s pipeline.

Zynga’s shares were up more than 7.35% to an 18-month high of $4.82 in recent trade, though they remain off about 49% from March 2012 all-time highs.

The upbeat outlook comes a week after Zynga said it would slash 15% of its workforce to make room for NaturalMotion, which makes the highly-successful “CSR Racing” and “Clumsy Ninja.”

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San Francisco-based Zynga halved its quarterly loss to $25.2 million in its most recent period despite a 43% decline in revenue. UBS says this is a sign of further stabilization.

“Despite the decline in daily active users during 2013, conversion of users into payers has remained relatively stable,” UBS analysts said. “We believe this bodes well for Zynga as it continues to focus its core operations around its key franchises.”

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