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What Caused To A 50% Rise In Zynga's Stock Price Since Early 2018?
Since the beginning of 2018, Zynga's share price has risen by about 50%. This can be attributed to changes in revenue, net profit margin and valuation multiples. In this article, we will discuss these three factors that affect stock prices.
Zynga's stock price has risen from around $4 in January 2018 to around $6 today. This can be attributed to higher income and multiple gains.
Revenues in 2017 increased from $861 million in 2017 to $907 million in 2018, and revenues are expected to reach $12.4 billion in 2019, thanks in part to the launch of new games and the impact of acquisitions.
Online game revenue increased from $666 million in 2017 to $671 million in 2018. They are expected to grow to $920 million in 2019. This can be attributed to the strong growth of the company's recently acquired portfolio, including games such as Merge Dragons and Empires & Puzzles.
Zynga's adjusted net income margin has risen sharply from 13% in 2017 to 23% in 2018, and may slightly decrease to 21% in 2019.
Zynga's net income margin rose sharply from 13.1% in 2017 to 23.2% in 2018 and is expected to reach 21.1% in 2019. This can be attributed to sales cost, sales and marketing, and expected growth in revenue from R&D costs as the company focuses on the development and marketing of new games.
Sales as a percentage of revenue increased from 30.1% in 2017 to 33.6% in 2018, and it may increase further to 36.0% in 2019, according to the trend in the first half. The percentage of R&D as a percentage of revenue remained at 29.8% in 2017 and 2018, but it is expected to grow to 33.8% in 2019 as the company invests in new games. Please note that Zynga's pipeline includes games from popular franchises, including power games and Star Wars.
The ratio of sales and marketing to revenue increased slightly from 24.6% in 2017 to 25.0% in 2018. We expect to grow further to 27.5% in 2019, in line with the trend in the first half of 2019. General and administrative expenses as a percentage of revenue fell from 12.6% in 2017 to 10.9% in 2018, and we expect to fall to 7.0% in 2019, reflecting the trend in the first half of 2019.
Interest and other income/expenses as a percentage of revenue fell from -1.4% in 2017 to -2.1% in 2018 and are expected to grow to -1.5% in 2019. The effective tax rate rose sharply from 29.7% in 2017 to 41.6% in 2018, and it may fall to 24.4%.
Based on the expected 2019 earnings, Zynga's price multiples are similar to Activision Blizzard, but lower than EA's earnings.