Zynga Inc. (ZNGA) shares are traded uniformly throughout Tuesday’s session as analysts weigh in on the company of $ 1.8 billion in cash and stock to acquire the Peak. Jefferies has raised its price target from $9 to $11 per share after analyst Alex Giaimo called the deal “transformational” rather than a “tuck-in.” He sees a bull case way to $13 for the stock, but note that the risk to reward ratio is a bit more balanced considering the stock section of the case.
Analyst Barclays Mario Lu raised the firm’s price target on Zynga shares from $7.50 to$ 9.50, reflecting a lower increase on the Street. Lu said that the acquisition will increase the company Forever franchises to eight by the end of the year 2020 and could be the “missing ingredient”, in order to expand EBITDA margins.
Zynga acquired state of the art for $ 1.8 billion in one-half in cash and half in stock. The peak is known for its two Always franchises, “Toon Blast” and “Toy of Breath,” and management believes that this acquisition is expected to add significant value to Zynga live services and will become an additional driver for the margin expansion in the future.
From a technical point of view, the stock moved sharply higher over the past few sessions following its financial results for the first quarter and at the Forefront of the acquisition. The stock briefly hit fresh highs during the session on Tuesday before giving the land to the mid-day. The relative strength index (RSI) moved into overbought territory with a reading of 74.42, but the moving average convergence divergence (MACD) remains bullish.
Traders should watch for consolidation above $9.25 levels, which could become a support level in the coming sessions. If the stock breaks down, traders could see a movement inferior to the past reaction high of $8.50 per share. If the stock breaks out higher, traders could see a recovery of the psychologically important $10.00 price.
The author holds no position in the stock(s) mentioned except through the passive management of index funds.