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Zynga (ZNGA) Dips More Than Broader Markets: What You Should Know

Zynga (ZNGA) closed at $9.43 in the latest trading session, marking a -0.42% move from the prior day. This move lagged the S&P 500's daily loss of 0.34%. Elsewhere, the Dow lost 0.5%, while the tech-heavy Nasdaq lost 0.73%.

Heading into today, shares of the maker of "FarmVille" and other online games had gained 1.5% over the past month, lagging the Consumer Discretionary sector's gain of 5.94% and the S&P 500's gain of 5.71% in that time.

Investors will be hoping for strength from ZNGA as it approaches its next earnings release, which is expected to be August 5, 2020. The company is expected to report EPS of $0.06, up 250% from the prior-year quarter. Our most recent consensus estimate is calling for quarterly revenue of $502.94 million, up 33.63% from the year-ago period.

Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $0.29 per share and revenue of $1.85 billion. These totals would mark changes of +2800% and +18.51%, respectively, from last year.

It is also important to note the recent changes to analyst estimates for ZNGA. These recent revisions tend to reflect the evolving nature of short-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. To benefit from this, we have developed the Zacks Rank, a proprietary model which takes these estimate changes into account and provides an actionable rating system.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. Within the past 30 days, our consensus EPS projection remained stagnant. ZNGA is holding a Zacks Rank of #2 (Buy) right now.

Investors should also note ZNGA's current valuation metrics, including its Forward P/E ratio of 32.84. This valuation marks a premium compared to its industry's average Forward P/E of 24.16.

We can also see that ZNGA currently has a PEG ratio of 2.63. The PEG ratio is similar to the widely-used P/E ratio, but this metric also takes the company's expected earnings growth rate into account. The Gaming industry currently had an average PEG ratio of 1.89 as of yesterday's close.

The Gaming industry is part of the Consumer Discretionary sector. This group has a Zacks Industry Rank of 149, putting it in the bottom 42% of all 250+ industries.

The Zacks Industry Rank includes is listed in order from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors. 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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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