Activision Blizzard (NASDAQ: ATVI) and Zynga (NASDAQ:ZNGA) are both mid-cap consumer discretionary companies, but which is the better business? We will contrast the two businesses based on the strength of their profitabiliy, valuation, risk, earnings, dividends, analyst recommendations and institutional ownership.

Earnings & Valuation

This table compares Activision Blizzard and Zynga’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Activision Blizzard $6.88 billion 6.67 $2.26 billion $1.32 46.16
Zynga $748.98 million 4.34 -$79.42 million ($0.11) -34.36

Activision Blizzard has higher revenue and earnings than Zynga. Zynga is trading at a lower price-to-earnings ratio than Activision Blizzard, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of current ratings and target prices for Activision Blizzard and Zynga, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Activision Blizzard 1 3 19 0 2.78
Zynga 0 4 8 0 2.67

Activision Blizzard currently has a consensus target price of $59.87, indicating a potential downside of 1.74%. Zynga has a consensus target price of $3.89, indicating a potential upside of 2.93%. Given Zynga’s higher probable upside, analysts clearly believe Zynga is more favorable than Activision Blizzard.

Dividends

Activision Blizzard pays an annual dividend of $0.30 per share and has a dividend yield of 0.5%. Zynga does not pay a dividend. Activision Blizzard pays out 22.7% of its earnings in the form of a dividend.

Profitability

This table compares Activision Blizzard and Zynga’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Activision Blizzard 14.63% 16.90% 8.76%
Zynga -12.16% -5.25% -4.45%

Institutional and Insider Ownership

87.5% of Activision Blizzard shares are held by institutional investors. Comparatively, 66.0% of Zynga shares are held by institutional investors. 2.1% of Activision Blizzard shares are held by company insiders. Comparatively, 12.4% of Zynga shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Risk and Volatility

Activision Blizzard has a beta of 1.07, suggesting that its share price is 7% more volatile than the S&P 500. Comparatively, Zynga has a beta of 0.84, suggesting that its share price is 16% less volatile than the S&P 500.

Summary

Activision Blizzard beats Zynga on 12 of the 15 factors compared between the two stocks.

About Activision Blizzard

Activision Blizzard, Inc. is a developer and publisher of interactive entertainment content and services. The Company develops and distributes content and services across various gaming platforms, including video game consoles, personal computers (PC) and mobile devices. Its segments include Activision Publishing, Inc. (Activision), Blizzard Entertainment, Inc. (Blizzard), King Digital Entertainment (King) and Other. Activision is a developer and publisher of interactive software products and content. Blizzard is engaged in developing and publishing of interactive software products and entertainment content, particularly in PC gaming. King is a mobile entertainment company. It is engaged in other businesses, including The Major League Gaming (MLG) business; The Activision Blizzard Studios (Studios) business, and The Activision Blizzard Distribution (Distribution) business. It also develops products spanning other genres, including action/adventure, role-playing and simulation.

About Zynga

Zynga Inc. is a provider of social game services. The Company develops, markets and operates social games as live services played on mobile platforms, such as iPhone Operating System (iOS) operating system and Android operating system and social networking sites, such as Facebook. The Company has developed a range of social games, including games in its Slots, Words With Friends, Zynga Poker and FarmVille franchises. It operates its games as live services and updates them with new features. It analyzes the data generated by its players’ game play and social interactions to guide the creation of new content and features. The Company operates its games as live services that are available anytime and anywhere. The Company invests in game categories, including Social Casino, Casual, Action Strategy and Invest Express. Social Casino includes Zynga Poker and its Slots games, such as Hit It Rich! Slots, Wizard of Oz Slots, Willy Wonka and the Chocolate Factory Slots, and Black Diamond Casino.

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