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Zynga (ZNGA) to Report Q3 Earnings: Is a Beat in Store?

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Zynga Inc. is set to report third-quarter 2017 results on Nov 7.

In the last reported quarter, the company’s earnings were in line with the Zacks Consensus Estimate. In the trailing four quarters, the company missed estimates thrice, resulting in an average negative earnings surprise of 200%.

Revenues in the second quarter increased 15% year over year to $209.2 million and beat the Zacks Consensus Estimate of $207 million.

For third-quarter 2017, the company expects revenues to be approximately $210 million.

Notably, shares of Zynga have gained 51% year to date, substantially outperforming the industry’s 23.8% rally.

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

Factors at Play

Zynga is one of the leading game developers and has been seeing strength in the mobile game market. The surge in mobile audience is a key growth driver for the company.

We expect Zynga’s increasing payer conversion rate driven by games like CSR2 and Zynga Poker to drive its top line. Moreover, the company’s acquisition of Solitaire games in the first quarter is anticipated to boost results in the soon-to-be reported quarter.

Zynga’s focus to improve live services is also anticipated to drive growth. Moreover, the company’s cost-cutting initiatives are helping it to improve operational efficiency.

However, management, on the last conference call, going by historical data, noted that player activity and advertising may decline in the third quarter.

Also, a sluggish web business, along with intensifying competition from the likes of Glu Mobile , Electronic Arts (EA - Free Report) and Nintendo (NTDOY - Free Report) , remains a concern.

Zynga Inc. Price and EPS Surprise

Zynga Inc. Price and EPS Surprise | Zynga Inc. Quote

Why a Likely Positive Surprise?

Our proven model shows that Zynga is likely to beat estimates due to the favorable combination of a Zacks Rank #3 (Hold) and Earnings ESP of +33.33%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3  have a significantly higher chance of beating earnings estimates. You can see the complete list of today’s Zacks #1 Rank stocks here.

Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.

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