Sterne Agee: Zynga's New Deal Looks Expensive

In a research report published earlier today, Sterne Agee noted that Zynga Inc.'s (NASDAQ: ZNGA) acquisition of OMGPOP is interesting, yet looking to be expensive.

According to Sterne Agee, “ZNGA's acquisition of OMGPOP, creator of Draw Something (currently the top free/paid App for iPhone/iPad), is interesting. However, we believe it is too early to tell how well the game can monetize beyond the initial spend ($0.99) on the download. If the media speculation of the acquisition price ($150M-$250M) is anywhere close to being accurate, the deal may look expensive. Recall, Zynga previously acquired Words with Friends creator Newtoy for $53M in late 2010. Reiterating Underperform; $7 target.”

Zynga closed yesterday at $13.72.