FB: Zynga lower, Facebook slightly up after Janney starts coverage

Zynga lower, Facebook slightly up after Janney starts coverage • 10:17 AM

• Janney's Tony Wilbe and Murali Sankar have started coverage of Facebook (FB +0.4%) with a Buy and $50 PT, and Zynga (ZNGA -2.8%) with a Sell and $2.50 PT. Zynga is selling off; Facebook opened higher, but has since pared its gains.
• In addition to making the usual comments about Facebook's mobile potential, the analysts argue Facebook has "a unique opportunity to gain [ad] share by working with TV networks," in light of research indicating U.S. consumers are increasingly using smart devices during ad breaks rather than fast-forwarding ads.
• They also argue Facebook is "ideally positioned to break historical barriers to entry" in the payments market (previous) on account of its 1M ad buyers, 1.1B users, and widespread adoption of Facebook Connect by third-party sites/apps.
• But with regards to Zynga, Wilbe and Sankar assert the company is seeing a "vicious cycle" of declining game activity and friend-to-friend promotional work. Tough competition and a changing relationship with Facebook are also raised as concerns.
• Oddly enough, the analysts also suggest next-gen console launches are a threat to both Zynga and Facebook's gaming-related revenue, and that "a substantial portion" of Zynga's 1.9M unique payers are hard-core gamers. The FarmVille and Call of Duty user bases aren't historically known for having huge overlap.
• Sell-side commentary on Facebook has been quite bullish (I, II) lately.

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FB price at time of publication: $37.89. Check FB price now »

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