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Zynga (ZNGA) Gains As Market Dips: What You Should Know

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Zacks Equity Research
·3 min read
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Zynga (ZNGA) closed at $8.66 in the latest trading session, marking a +0.46% move from the prior day. The stock outpaced the S&P 500's daily loss of 0.13%. Elsewhere, the Dow lost 0.23%, while the tech-heavy Nasdaq added 0.54%.

Coming into today, shares of the maker of "FarmVille" and other online games had gained 7.75% in the past month. In that same time, the Consumer Discretionary sector gained 8.91%, while the S&P 500 gained 3.5%.

ZNGA will be looking to display strength as it nears its next earnings release. The company is expected to report EPS of $0.09, up 125% from the prior-year quarter. Meanwhile, our latest consensus estimate is calling for revenue of $674.64 million, up 55.66% from the prior-year quarter.

For the full year, our Zacks Consensus Estimates are projecting earnings of $0.38 per share and revenue of $2.25 billion, which would represent changes of +3700% and +43.58%, respectively, from the prior year.

Any recent changes to analyst estimates for ZNGA should also be noted by investors. These revisions help to show the ever-changing nature of near-term business trends. As a result, we can interpret positive estimate revisions as a good sign for the company's business outlook.

Our research shows that these estimate changes are directly correlated with near-term stock prices. Investors can capitalize on this by using the Zacks Rank. This model considers these estimate changes and provides a simple, actionable rating system.

The Zacks Rank system ranges from #1 (Strong Buy) to #5 (Strong Sell). It has a remarkable, outside-audited track record of success, with #1 stocks delivering an average annual return of +25% since 1988. The Zacks Consensus EPS estimate remained stagnant within the past month. ZNGA currently has a Zacks Rank of #3 (Hold).

Looking at its valuation, ZNGA is holding a Forward P/E ratio of 22.91. This valuation marks a discount compared to its industry's average Forward P/E of 32.18.

Investors should also note that ZNGA has a PEG ratio of 1.31 right now. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. The Gaming was holding an average PEG ratio of 1.2 at yesterday's closing price.

The Gaming industry is part of the Consumer Discretionary sector. This group has a Zacks Industry Rank of 192, putting it in the bottom 25% of all 250+ industries.

The Zacks Industry Rank gauges the strength of our individual industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

You can find more information on all of these metrics, and much more, on Zacks.com.


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