Will Zynga Stock Pop On Earnings?
Estimize | Aug 04, 2016 09:33AM ET
Zynga Inc (NASDAQ:ZNGA) Information Technology - Software | Reports August 4, After Market Closes
Key Takeaways
- The Estimize consensus is looking for flat profits on $174.11 million in revenue, right in line with the Wall Street consensus
- Zynga hasn’t released a viral sensation in over 5 years, yet the stock is up nearly 20% in the past 12 months
- Zynga is adamant on releasing 10 games a year with the hope that one of them turn into the next FarmVille
Zynga is scheduled to report second quarter results tomorrow after the market closes. Its business has greatly benefited from the strength of the mobile game market. At its current pace, mobile gaming is the fastest growing subset of the overall gaming industry. But that hasn’t translated to success on the stock market.
Shares of many mobile developers have suffered after failing to produce multiple viral sensations. Zynga has been slightly different though. Despite limited success since FarmVille and Words with Friends, released in 2009, Zyna stock is up nearly 20% from a year earlier.
Tomorrow’s report should shed some light on any new games in the pipeline and the success of its legacy games. The Estimize consensus is looking for no profits, up 146% compared to the same period last year. That estimate has increased about 9% since the company’s last reported in May. Revenue is anticipated to drop 13% to $174.11 million, a significant decline from last quarter.
It’s not surprising that sales have started to decline given that Zynga hasn’t released a viral sensation in over 5 years. The company is still relying on Words with Friends and Farmville to drive the top line. CSR Racing 2, released this quarter, started off on a strong foot but hasn’t matched the popularity of its past sensations. The company is adamant on releasing 10 games a year. If any of these become blockbuster titles then Zynga is in good shape.
Competition has also contributed to the company’s slowing business. Electronic Arts and Activision are emerging as serious players in the mobile gaming business. Activision is leveraging its acquisition of King Digital to release new and innovative products. Meanwhile, traditional competition such as Gluu Mobile also poses an imminent threat.
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