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Zynga (ZNGA) to Report Q3 Earnings: What's in the Cards?

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Zynga (ZNGA - Free Report) is set to report third-quarter 2020 results on Nov 4.

The company expects third-quarter revenues to be $445 million, up 29% year over year.

The Zacks Consensus Estimate for revenues is pegged at $628.1 million, indicating an increase of 59.1% from the year-ago quarter’s reported figure.

Moreover, the consensus mark for earnings has increased a penny to 9 cents per share over the past 30 days. The company had reported break-even earnings 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 81.5%.

Zynga Inc. Price, Consensus and EPS Surprise

Zynga Inc. Price, Consensus and EPS Surprise

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

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

Factors Likely to Influence Q3 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, the 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.

Notably, in August, Zynga completed the buyout of Peak, creator of Toon Blast and Toy Blast. The deal is likely to have aided the expansion of the company’s forever franchise portfolio and strengthened its international audience base.

Additionally, the integration of popular brands within the company’s live services, including Fast & Furious in CSR2, Rick and Morty in Merge Dragons! and a new Dragons of Westeros feature in Game of Thrones Slots Casino, is expected to have expanded platform relationships and user acquisition.

Moreover, the increasing popularity of games like Words With Friends Word Pop, Farm Ville 3, Merge Magic! and CSR2 is expected to have benefited Zynga’s net bookings in the to-be-reported quarter.

Further, Zynga announced an agreement with NASCAR, to feature the iconic NASCAR Cup Series Chevrolet Camaro ZL1 1LE race car as an unlockable car in CSR2 American Road Trip Series. Notably, CSR2 is expected to have gained popularity from key partnerships and continued featuring of exclusive content from automotive brands.

Markedly, Zynga expects net bookings to be $620 million, indicating 57% year-over-year growth from the figure reported in the year-ago quarter.

The Zacks Consensus Estimate for bookings is pegged at $627 million, indicating growth of 58.7% from the figure reported in the year-ago quarter.

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, as well as a rebound in Zynga Poker is expected to have positively impacted the top line.

The introduction of Battle Pass features within Empires & Puzzles, Merge Magic! and Hit it Rich! Slots is likely to have driven customer engagement and monetization of the company’s product portfolio.

For the to-be-reported quarter, the consensus mark for daily average users (DAU) and monthly average users (MAU) is pegged at 25.98 million and 83 million, respectively, indicating an increase of 30% and 23.9% year over year.

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 -19.67% 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 few companies, which, per our model, have the right combination of elements to post an earnings beat in their upcoming releases.

TEGNA (TGNA - Free Report) has an Earnings ESP of +15.38% and a Zacks Rank #1. You can see the complete list of today’s Zacks Rank #1 stocks here.

Fox Corporation (FOXA - Free Report) has an Earnings ESP of +15.93% and a Zacks Rank #2.

Lionsgate (LGF.A - Free Report) has an Earnings ESP of +45.00% and a Zacks Rank #2.

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Zynga Inc. (ZNGA) - free report >>

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Lions Gate Entertainment Corp. (LGF.A) - free report >>