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Zynga (ZNGA) Stock Sinks As Market Gains: What You Should Know

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Zynga (ZNGA - Free Report) closed the most recent trading day at $9.57, moving -0.42% from the previous trading session. This move lagged the S&P 500's daily gain of 0.04%. At the same time, the Dow added 0.19%, and the tech-heavy Nasdaq gained 0.28%.

Heading into today, shares of the maker of "FarmVille" and other online games had gained 10.33% over the past month, outpacing the Consumer Discretionary sector's gain of 3.46% and the S&P 500's gain of 3.84% in that time.

ZNGA will be looking to display strength as it nears its next earnings release. On that day, ZNGA is projected to report earnings of $0.09 per share, which would represent year-over-year growth of 125%. Our most recent consensus estimate is calling for quarterly revenue of $674.64 million, up 55.66% from the year-ago period.

It is also important to note the recent changes to analyst estimates for ZNGA. These revisions typically reflect the latest short-term business trends, which can change frequently. As a result, we can interpret positive estimate revisions as a good sign for the company's business outlook.

Research indicates that these estimate revisions are directly correlated with near-term share price momentum. 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.

Ranging from #1 (Strong Buy) to #5 (Strong Sell), the Zacks Rank system has a proven, outside-audited track record of outperformance, with #1 stocks returning an average of +25% annually since 1988. The Zacks Consensus EPS estimate remained stagnant within the past month. ZNGA currently has a Zacks Rank of #4 (Sell).

Looking at its valuation, ZNGA is holding a Forward P/E ratio of 22.52. This valuation marks a discount compared to its industry's average Forward P/E of 30.15.

Investors should also note that ZNGA has a PEG ratio of 1.28 right now. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. ZNGA's industry had an average PEG ratio of 1.3 as of yesterday's close.

The Gaming industry is part of the Consumer Discretionary sector. This industry currently has a Zacks Industry Rank of 197, which puts it in the bottom 23% 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.

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