Social game developer
) and game developer Atari recently launched a mobile version of
the popular arcade-style gaming franchise "Breakout." The mobile
game called "
Super Sunny Breakout
" is currently available on
) App store and can be played on iPhone, iPad and iPod touch for 99
The new game revolves around the character Rodney the bunny,
whose main objective is to free other critters from cages at the
Evil Animal Testing (EAT) labs. Players use the bunny to break into
EAT to destroy structures and cages. In the course of their
journey, they can either collect or purchase coins via app store in
order to feed critters and restore energy as well as purchase
We believe that the popularity of the "Breakout" brand, coupled
with its availability on Apple devices such as the new iPhone 5
will benefit the new game going forward. Zynga expects to release
the new game on
) Android-based devices in the near future, which will further
boost customer base going forward.
Lately, mobile gaming has emerged as a key growth market for
Zynga. This is particularly due to the strong adoption and
increasing spending on mobile games. According to data available
from market research firm NPD, currently more than 22% of all
gamers in the US play mobile games, a 9% jump from 2011. We believe
that this trend bodes well for Zynga going forward.
We believe that the partnership with Atari reflects Zynga's
focus on expanding its third-party developer network, which will
help it to improve its presence in the mobile gaming sector going
Moreover, Zynga is well positioned to grow in the near term
based on its innovative product pipeline and its dominant position
in the social gaming sector. The company's constant investments in
the field of mobile gaming are expected to act as a positive
catalyst going forward.
However, monetization of mobile games remains a concern, due to
availability of free-to-play games, which are expected to hurt
top-line growth going forward. Moreover, higher spending on
research & development, technology and game development as well
as increasing competition will affect the company's profitability
Zynga recently announced its fiscal third quarter 2012
preliminary guidance, wherein the company projected quarterly loss
to be in the range of 12 cents to 14 cents per share. For the third
quarter, Zynga expects to generate revenues in the range of $300
million to $305 million, which is higher than the Zacks Consensus
Estimate of $263 million.
Thus, we remain Neutral on Zynga over the long term (6-12
months). Currently, Zynga has a Zacks #3 Rank, which implies a Hold
rating over the short term.
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