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Zynga (ZYNGA) to Report Q2 Earnings: What's in the Cards?

Zacks Equity Research

Zynga ZNGA is set to report second-quarter 2019 results on Jul 31.

Notably, the company’s earnings missed the Zacks Consensus Estimate in all the trailing four quarters, the average negative surprise being 112.08%.

Zynga’s average daily active users (DAUs) were 22 million in first-quarter 2019, down 1 million year over year. Additionally, the company’s average monthly active users (MAUs) were 72 million, down 10 million year over year.

Zynga’s average monthly unique users (MUUs) were 43 million in first-quarter 2019, down $3 million year over year. Moreover, the company’s average monthly unique payers (MUPs) were 1.4 million in first-quarter 2019 compared with 1 million in the year-ago period.

Expectations for Q2

Zynga expects second-quarter revenues to be $280 million, up 29% year over year.

Zynga Inc. Price and EPS Surprise

Zynga Inc. Price and EPS Surprise
Zynga Inc. Price and EPS Surprise

Zynga Inc. price-eps-surprise | Zynga Inc. Quote

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Management expects bookings to be $360 million, up 54% year over year in second-quarter 2019. The Zacks Consensus Estimate is pegged at $362 million.

The Zacks Consensus Estimate for revenues is pegged at $363.3 million, indicating an increase of 55.3% from the year-ago reported figure.

Moreover, the consensus mark for earnings has remained steady at 5 cents per share over the past seven days. The figure indicates solid growth of 150% from the year-ago reported figure.

For the to-be reported quarter, the consensus mark for DAUs and MAUs is pegged at 21.65 million and 71 million, respectively, indicating a decrease of 5.9% and 19.3% year over year.

Additionally, the consensus mark for MUUs is pegged at 49.12 million, indicating a decrease of 7.3% year over year. However, MUPs are expected to increase 6.4% year over year to 1.17 million in second-quarter 2019.

Factors Likely to Influence Q2 Results

The top line is likely to be driven by Zynga’s mobile live services supported by five franchises - CSR Racing, Words With Friends, Zynga Poker, Empires & Puzzles and Merge Dragons!.

Bookings are expected to be aided by contributions from integration of Gram Games and Small Giant Games. Games like Words With Friends and CSR2 are also expected to strengthen bookings.

However, a decline in older mobile and web games users and Zynga Poker users is expected to be a dampener.

Higher amortization of intangible assets and deferred revenues from acquisitions are expected to hurt gross margin in the to-be-reported quarter.

Moreover, increased sales and marketing expenses, as guided by the management, is expected to hurt profits.

What Our Model Says

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP.  Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.

Zynga has a Zacks Rank #3 but an Earnings ESP of -15.15%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter .

Stocks to Consider

Here are some companies, which, per our model, have the right combination of elements to post an earnings beat in their upcoming release.

Live Nation Entertainment LYV has an Earnings ESP of +5.06% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

WillScot Corp. WSC has an Earnings ESP of +11.76% and a Zacks Rank #2.

SeaWorld Entertainment SEAS has an Earnings ESP of +11% and a Zacks Rank #2.

 

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Zynga Inc. (ZNGA) : Free Stock Analysis Report
 
WillScot Corporation (WSC) : Free Stock Analysis Report
 
SeaWorld Entertainment, Inc. (SEAS) : Free Stock Analysis Report
 
Live Nation Entertainment, Inc. (LYV) : Free Stock Analysis Report
 
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