Zynga Snaps Up Echtra Games; Street Says Buy

Zynga has acquired Echtra Games for an undisclosed sum, the game developer announced on March 3.

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Echtra Games is a game studio developing games that can be played across various platforms and whose core team members have worked on developing gaming franchises like Diablo, Diablo II, and the Torchlight.

Zynga’s (ZNGA) CEO Frank Gibeau said, “This acquisition will be instrumental in growing our iconic licenses and brands from mobile to PCs and consoles, while helping to further expand Zynga’s total addressable market.”

The acquisition is expected to strengthen Zynga’s gaming development tools and enable the company to create cross-platform future games. Specifically, the deal also includes Echtra’s “proprietary cross-platform development tools and technologies.” In addition, the Echtra team will develop a new, cross-platform, role-playing game (RPG) in partnership with Zynga’s NaturalMotion studio. (See Zynga stock analysis on TipRanks)

Last month, ZNGA reported a 4Q loss per share of $0.05 that narrowed from a loss per share of $0.11 in the preceding quarter but compared to analysts’ estimates of earnings per share (EPS) of $0.09. The company had revenues of $616 million in 4Q, up by 52% year-on-year but below consensus estimates of $677.73 million

Following the acquisition announcement, KeyBanc analyst Tyler Parker reiterated a Buy rating and a price target of $13.50 on the stock. Parker said, “Zynga’s acquisition of Echtra Games is clearly an effort to accelerate its move into cross-platform development, bringing on developers with proprietary tools built on top of the Unreal Engine.”

Parker believes that “bringing on a team with a knowledge of console and PC development makes sense for Zynga.”

The rest of the Street is bullish on the stock with a Strong Buy consensus rating based on 14 Buys, 1 Hold, and 1 Sell. The average analyst price target of $13.22 implies around 19% upside potential to current levels.