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

Zynga ZNGA is set to report second-quarter 2020 results on Aug 5.

The company expects second-quarter revenues to be $400 million, up 6.4% year over year. Management expects the top line to have benefited from mobile live services with expected sequential growth across its five forever franchises.

The Zacks Consensus Estimate for revenues is pegged at $503 million, indicating an increase of 33.6% from the year-ago reported figure.

Moreover, the consensus mark for earnings has remained steady at 8 cents per share over the past 30 days. The company had incurred loss of 4 cents per share in the year-ago quarter.

Notably, the company’s earnings missed the Zacks Consensus Estimate in the trailing four quarters, the average negative surprise being 98.3%.

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

Factors Likely to Influence Q2 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.

Moreover, coronavirus-led lockdown is expected to have been a major growth driver in increasing the number of active users in the to-be-reported quarter.

Zynga Inc. Price and EPS Surprise

Zynga Inc. Price and EPS Surprise

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

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.

In the second quarter, Zynga launched Words With Friends Word Pop, a new voice game based on Words With Friends, exclusively for Alexa.

Notably, Zynga expects net bookings to be $460 million, up 22.3% year over year from first-quarter 2019 reported figure.

The Zacks Consensus Estimate for bookings is pegged at $503 million, indicating growth of 33.8% from the figure reported in the year-ago quarter.

Notably, Zynga announced plans to create more multiplayer titles exclusively for Snap’s SNAP gaming platform, Snap Games. The first new game under this collaboration, Bumped Out released exclusively on Snap Games in the soon to-be reported quarter is likely to have aided user growth.

Elite Customs feature released in Zynga’s popular mobile drag racing game, CSR2 is expected to have boosted user engagement in the to-be reported quarter.

Additionally, the soft launch of the magical match-3 mobile game, Harry Potter: Puzzles & Spells in select markets, in the first quarter, officially licensed from Warner Bros. Interactive Entertainment is expected to have boosted active player accounts.

Moreover, 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 22.3 million and 71 million, respectively, indicating an increase of 6.3% and 1.4% from the year-ago reported figure.

Moreover, intensifying competition in the video game space from the likes of Electronic Arts, Take-Two Interactive, and Activision Blizzard is likely to have had a negative impact on second-quarter revenues.

What Our Model Says

According to the Zacks model, the combination of a positive Earnings ESP and Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Zynga has an Earnings ESP of 0.00% and a Zacks Rank #4 (Sell). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks to Consider

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

Synaptics SYNA has an Earnings ESP of +10.60% and currently carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Benefitfocus BNFT has an Earnings ESP of +6.25% and carries a Zacks Rank of 2, currently.

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