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Will Zynga (ZNGA) Surprise Estimates this Earnings Season? - Analyst Blog

Zacks Equity Research

Zynga Inc. (ZNGA) is set to report fourth-quarter 2014 results on Feb 12. In the previous quarter, the company reported in-line earnings. On an average, Zynga has delivered a positive earnings surprise of 20.48% in the last four quarters.

Let’s see how things are shaping up for this quarter.

Factors at Play

Zynga is well positioned to benefit from the strong mobile game market, going forward. According to research reports, 2014 industry revenues from mobile games are expected to jump over 40% year over year. In addition, we believe that launch of games in 2014 including the likes of NFL Showdown and Zynga Poker will drive top-line growth in the to-be-reported quarter.

However, intensifying competition from King Digital (KING), Glu Mobile (GLUU) and Electronic Arts remains the headwind. The resurgence in physical game sales due to Next Gen consoles will be a significant headwind at least in the near term.

Earnings Whispers

Our proven model does not conclusively show that Zynga is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here as you will see below.

Zacks ESP: Zynga currently has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 4 cents.

Zacks Rank: Zynga has a Zacks Rank #2 (Buy), which when combined with a 0.00% ESP, makes surprise prediction difficult.

We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

A company which, as per our model, has the right combination of elements to post an earnings beat this quarter is Criteo SA (CRTO), with an Earnings ESP of +4.00% and a Zacks Rank #3 (Hold).

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ZYNGA INC (ZNGA): Free Stock Analysis Report
GLU MOBILE INC (GLUU): Free Stock Analysis Report
KING DIGITL ENT (KING): Free Stock Analysis Report
CRITEO SA-ADR (CRTO): Free Stock Analysis Report
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