{"id":11238,"date":"2012-04-28T01:14:40","date_gmt":"2012-04-28T05:14:40","guid":{"rendered":"http:\/\/drduru.com\/onetwentytwo\/?p=11238"},"modified":"2012-04-28T01:14:40","modified_gmt":"2012-04-28T05:14:40","slug":"untangling-facebook-zynga-embrace","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2012\/04\/28\/untangling-facebook-zynga-embrace\/","title":{"rendered":"Untangling the Facebook-Zynga Embrace: The Basis For A Relative Valuation for Zynga"},"content":{"rendered":"

(This is an excerpt from an article I originally published on Seeking Alpha on April 24, 2012. Click here to read the entire piece<\/a>.)<\/strong><\/p>\n

This post is a follow-up to one I wrote last week titled “Time to Buy Zynga Ahead of the Facebook IPO<\/a>.” In that post, I provided a very rough upside price target on Zynga (ZNGA) based on Facebook’s (FB) disclosure that ZNGA accounts for 12% of its revenue. I decided to dig a little deeper into the numbers to see whether I could get a bit more precise on this relative valuation. {snip}<\/p>\n

{snip}<\/p>\n

Regardless, Facebook and ZNGA are strong co-dependents with mutual interests in the viability of each the integrated business models. I daresay that one day Facebook may decide to acquire ZNGA because of its dependence on the success of the company’s games even as it seeks to diversify its revenue base. I will save such speculation for a later day after we see what Facebook does with its IPO riches.<\/p>\n

These numbers mean that I will stick by the well-publicized 12% Facebook-from-Zynga revenue share number as a starting point to calculate a relative valuation for ZNGA, but I also recognize that I could justify using a higher number based on the linkage with display advertising. Assuming Facebook gets a $90B valuation (10% lower than the $100B still bandied about), ZNGA should get at least a $10.8B valuation. Given ZNGA’s current $6.49B valuation and $9 stock price, I get a rough upside target of $15. Using the 19% Facebook-from-Zynga revenue share, I get a rough upside target as much as $24. Again, a more conservative approach makes sense based on Facebook’s potential to diversify its revenue away from ZNGA.<\/p>\n

The main point here is that if you are interested in buying into the Facebook IPO, Zynga is currently a much cheaper way to buy into the hype. {snip}<\/p>\n

Click image for a larger view…<\/strong><\/em>
\n


\n
\"ZNGA's<\/a>
ZNGA's turbulent 5-month journey<\/figcaption><\/figure>
\nSource: FreeStockCharts.com<\/a><\/strong>
\n<\/center><\/p>\n

{snip}<\/p>\n

Be careful out there!<\/p>\n

(This is an excerpt from an article I originally published on Seeking Alpha on April 24, 2012. Click here to read the entire piece<\/a>.)<\/strong><\/p>\n

Full disclosure: long ZNGA shares and calls<\/p>\n","protected":false},"excerpt":{"rendered":"

(This is an excerpt from an article I originally published on Seeking Alpha on April 24, 2012. Click here to read the entire piece.) This post is a follow-up to one I wrote last week titled “Time to Buy Zynga Ahead of the Facebook IPO.” In that post, I provided a very rough upside price … Read more<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[220],"tags":[549,943,916,917],"class_list":["post-11238","post","type-post","status-publish","format-standard","hentry","category-earnings","tag-facebook","tag-fb","tag-znga","tag-zynga"],"yoast_head":"\nUntangling the Facebook-Zynga Embrace: The Basis For A Relative Valuation for Zynga - ONE-TWENTY TWO: Trading Financial Markets<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/drduru.com\/onetwentytwo\/2012\/04\/28\/untangling-facebook-zynga-embrace\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Untangling the Facebook-Zynga Embrace: The Basis For A Relative Valuation for Zynga - ONE-TWENTY TWO: Trading Financial Markets\" \/>\n<meta property=\"og:description\" content=\"(This is an excerpt from an article I originally published on Seeking Alpha on April 24, 2012. 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