Zynga Inc.

ZNGA Details

Zynga Inc. (NASDAQ: ZNGA) operates as a provider of social game services that develop and distribute social games available on mobile devices, social networking sites, PCs, consoles, and other platforms. It has a diversified portfolio of popular game franchises such as Zynga Poker, Harry Potter: Puzzles & Spells, and CSR Racing. It generates the majority of its revenue from the sale of in-game virtual items and advertising services.

Geographical Expansion through Horizontal Acquisition: On October 05, 2021, ZNGA completed the acquisition of StarLark, developer of Golf Rival, the world's second-largest mobile golf game, from Betta Games, for a total consideration (cash and stock) of ~USD 525 million. The acquisition furthers ZNGA's footprint in China by establishing a studio and adding several additional projects in early development.

Upcoming Launch: On October 06, 2021, ZNGA initiated pre-registration for the latest game, FarmVille 3, scheduled to launch on November 04, 2021, on iOS and Android devices and M1-equipped Apple laptop and desktop platforms.

Q2FY21 Results: The company reported a YoY surge of 59.40% in total revenue to USD 720.0 million in Q2FY21 (ended June 30, 2021) from USD 451.7 million in Q2FY20, attributable to 51.21% YoY growth in its Online game segment, which accounted for 81.53% of the total revenue in Q2FY21, and a 109.45% YoY surge in the Advertising & Other segment. Net income for Q2FY21 was USD 27.8 million compared to a net loss of USD 150.3 million in Q2FY20. As of June 30, 2021, ZNGA had cash & cash equivalents (including short-term investments) of USD 1.50 billion and total debt of USD 1.32 billion.

Total Revenue & Bookings (Source: Q2FY21 Earnings Presentation, August 05, 2021)

Key Risks: ZNGA derives the majority of the revenue from a limited number of paying players. It's Mobile MUPs (monthly unique payers) represented only ~4.0% of the average Mobile MUUs (monthly unique users) in Q2FY21. Hence, any failure to retain the existing MUPs or add new ones could adversely impact its operations.

Outlook:

Outlook (Source: Q2FY21 Earnings Presentation, August 05, 2021)

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

ZNGA Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: ZNGA stock price has decreased by 30.58% in the past six months and is currently leaning towards the lower-band of the 52-week range of USD 7.14 to USD 12.32. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 35.60. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 9.50. Considering the significant correction in the stock price, acquisition of StarLark, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the current price of USD 7.40, up 0.41% as of October 12, 2021, 11:32 AM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

Desktop Metal, Inc.

DM Details

Desktop Metal, Inc. (NYSE: DM) is engaged in producing end-use parts using additive manufacturing (AM) systems (3D printing solutions). DM offers a portfolio of integrated AM solutions for various industrial and commercial end-users comprising hardware, software, materials, and services. It generates its revenue from the sales of AM equipment, along with related accessories and consumables, installation, training, post-installation hardware and software support, and various software solutions. In Q2FY21, the Americas accounted for 60.08% of DM's total revenue. As of October 12, 2021, the company's market capitalization stood at USD 1.78 billion.

Growing Demand: On October 06, 2021, DM announced that its Shop System, a metal binder jetting system designed for machine shops, is seeing high demand from European manufacturers. Since its volume shipment in Q4FY20, the Shop System has witnessed strong adoption among leading global businesses looking to use high-quality binder jetting technology to print end-use metal parts in volumes and at costs unattainable through either conventional manufacturing or legacy additive manufacturing processes.

Q2FY21 Results: The company reported a YoY surge of 7.67x in total revenues to USD 18.98 million in Q2FY21 (ended June 30, 2021) from USD 2.19 million in Q2FY20. The Products segment, which represented 92.53% of the total revenue in Q2FY21, witnessed a sharp uptick of 10.47x, whereas the Services segment expanded by 115.35% YoY. However, net loss for Q2FY21 increased to USD 43.18 million vs. USD 23.77 million reported in Q2FY20. As of June 30, 2021, the company had cash and cash equivalents (including short-term investments) of USD 514.52 million and total debt of USD 0.31 million.

Financial Highlights (Source: Earnings Presentation, August 11, 2021)

Key Risks: DM operates in the highly fragmented and competitive AM industry and competes directly with significant players having higher financial and operational resources at their disposal. Therefore, the development of superior products or pricing pressure by competitors could harm its operations. Furthermore, DM is dependent on third-party manufacturers for the majority of its manufacturing operations. Hence any failure of contractual obligation by third parties in procuring the components or subcontract engineering work could adversely impact its operations.

Outlook: In FY21, DM expects to generate over USD 100 million revenue, with an adjusted EBITDA ranging between USD (70) – (80) million. DM also forecasts to end FY21 with an annualized revenue run rate of USD 160 million (excluding the ExOne acquisition announced on August 11, 2021).

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

 (Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

DM Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: DM's stock price decreased 50.11% in the past six months and is currently leaning towards the lower band of its 52-week range of USD 6.70 to USD 34.94. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 36.35. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 8.47. Considering the significant correction in the stock price, strong balance sheet, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the closing price of USD 6.90, up 0.88% as of October 12, 2021.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

TFF Pharmaceuticals, Inc.

TFFP Details

TFF Pharmaceuticals, Inc. (NASDAQ: TFFP) is an early-stage biopharmaceutical company engaged in developing and commercializing new therapeutic solutions to treat pulmonary diseases leveraging its proprietary Thin Film Freezing (TFF) technology platform. Its leading product candidates are Voriconazole Inhalation Powder (TFF VORI) and Tacrolimus Inhalation Powder (TFF TAC). TFFP does not currently have a commercial product, but it is working with current partners to further its projects and forming new license arrangements with major pharmaceutical companies.

Product Pipeline (Source: Company Website)

Progressing Towards Commercialization: On September 23, 2021, TFFP announced top-line results from the recently completed Phase 1 clinical study for TFF TAC, revealing a favorable safety profile and proved therapeutic drug levels achieved at low dosages. The findings of the Phase 1 study suggests that TFF TAC can be administered with an acceptable safety profile to achieve the appropriate balance of local and systemic concentrations for immunosuppression at the lung transplant site while minimizing the risk of supra-therapeutic systemic exposure, causing renal toxicity in patients.

H1FY21 Results: TFFP has not initiated any commercial operations. However, it had a grant revenue of USD 26.16 thousand during H1FY21 (ended June 30, 2021). TFFP has increased its research and development expenditure to USD 8.04 million in H1FY21 from USD 4.80 million in H1FY20. As a result, its net loss for H1FY21 increased to USD 12.31 million from USD 7.61 million reported in H1FY20. As of June 30, 2021, the company had cash and cash equivalents of USD 52.07 million and no outstanding debt.

Key Risks: TFFP's business entirely depends on the patent rights licensed to them from the University of Texas at Austin (UT). The patent license agreement requires TFFP to pay royalties and milestone payments and comply with several covenants and commitments. Non-observance of such norms could lead to termination of the contract, which may impair the company's operations. In addition, TFFP's prospects are dependent on the success of its three TFF product candidates. It has invested a significant number of resources in their development. If it fails to obtain marketing approvals or cannot set up an efficient manufacturing and distribution mechanism, it could negatively impact its operations.

Outlook: As per its Q2FY21 press release, TFFP expects to release top-line data from the TFF VORI study in Q3FY21 and commence a pivotal trial for TFF VORI in Q4FY21. It also forecasts to reveal TFF TAC top-line data in Q3FY21.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

 (Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

TFFP Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: TFFP stock price fell by 44.75% in the past six months and is currently at the lower-band of the 52-week range of USD 6.85 to USD 21.14. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 36.31.  We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 8.94. Considering the significant correction in the stock price in the past six months, positive clinical trial results, robust product pipeline, and current valuation, we recommend a "Speculative Buy" rating on the stock at the current price of USD 7.00, down 2.23% as of October 12, 2021, at 1:29 PM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached. 

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine and its related entities do not hold interests in any of the securities or other financial products covered on the Kalkine website.

Kalkine Media Pty Ltd, an affiliate of Kalkine Pty Ltd, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.