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Zynga (ZNGA) to Report Q4 Earnings: What's in the Cards?

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Zynga ZNGA is set to report fourth-quarter 2019 results on Feb 5.

The company expects fourth-quarter revenues to be $365 million, up 36.7% year over year.

The Zacks Consensus Estimate for revenues is pegged at $417.6 million, indicating an increase of 56.2% from the year-ago reported figure.

Moreover, the consensus mark for earnings has increased by a penny to 6 cents per share over the past 30 days. The figure indicates growth of 50% from the year-ago reported figure.

Notably, the company’s earnings missed the Zacks Consensus Estimate in the trailing four quarters, the average negative surprise being 167.5%.

Let’s see how things have shaped up for the upcoming announcement.

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

Factors Likely to Influence Q4 Results

Zynga’s mobile live services supported by strong popularity of five franchises — CSR Racing, Words With Friends, Zynga Poker, Empires & Puzzles and Merge Dragons! are expected to have contributed to top-line growth in the soon-to-be-reported quarter.

Management expects the top line to benefit from mobile live services with expected sequential growth across its five forever franchises, as well as initial contributions from Merge Magic! launched on Sep 18.

Additionally, increasing popularity of games like Words With Friends and CSR2 is expected to have benefited Zynga’s net bookings in the to-be-reported quarter.

Notably, Zynga expects net bookings to be $415 million, up 63.4% year over year in fourth-quarter 2019. The Zacks Consensus Estimate for bookings is pegged at $418 million, indicating growth of 56.6% from the figure reported in the year-ago quarter.

Moreover, tremendous initial response from soft launches of games such as Farmville 3 from Gram Games and Puzzle Combat from Small Giant Games in the third quarter are expected to have driven user engagement levels and active player accounts in the fourth quarter.

Further, Zynga’s strength in Social Slots portfolio due to games such as Wizard of Oz Slots, Hit It Rich! Slots and Game of Thrones Social Slots Casino is expected to have positively impacted the top line.

However, declines in older mobile and web game users and Zynga Poker users are expected to have been a dampener.

For the to-be-reported quarter, the consensus mark for daily average users (DAU) and monthly average users (MAU) is pegged at 20.12 million and 68 million, respectively, indicating a decrease of 12.1% and 22.7% from the year-ago reported figure.

Additionally, the consensus mark for monthly unique users (MUU) is pegged at 50 million, indicating a decrease of 3.8% year over year. The consensus estimate for monthly unique payers (MUP) is pegged at 1.1 million, indicating 0.9% year-over-year increase.

Moreover, increase in operating expenses, as guided by the management, is expected to keep margins under pressure.

Key Developments in Q4

In the fourth quarter, Zynga partnered with the hyper sports car manufacturer Bugatti and launched an event series in CSR2, showcasing two different Bugatti cars including three exclusive cars for in-game players. Additionally, the company launched ‘Best of British’ event series, featuring British hypercars such as McLaren Senna, Noble M600 Carbon Sport among others.  

Zynga’s Words With Friends launched new, holiday-themed activity to treat players with special in-game and real-world giveaways as part of a two-week event ahead of the holiday season from country music artist, Garth Brooks.

Notably, the company signed a license deal with Adult Swim to bring characters from the Emmy Award-winning TV series, Rick and Morty, to Gram Games’ Merge Dragons! in a special live event.

Moreover, Zynga announced new feature addition with Hero costumes for players in Empires & Puzzles, which provides the heroes in the game with new costumes that grant exclusive skills and increased power.

What Our Model Says

According to the Zacks model, the right combination of two key ingredients — a positive Earnings ESP and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — increases the odds of a positive earnings surprise.

Zynga has an Earnings ESP of +17.00% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Other Stocks to Consider

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

Advanced Energy Industries, Inc. AEIS has an Earnings ESP of +10.80% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Microchip Technology MCHP has an Earnings ESP of +1.33% and a Zacks Rank of 1.

Bruker Corporation BRKR has an Earnings ESP of +0.86% and a Zacks Rank #2.

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