Earnings Expectations for Zynga, on Deck

Zynga Inc. (ZNGA) is a leading developer of the world’s most popular social games that are played by more than 100 million monthly consumers. The Company has created evergreen franchises FarmVilleZynga PokerWords with FriendsHit it Rich! Slots and CSR Racing

Over the years, the company has been through a really interesting all-around transformation, and expansion, Zynga’ strong business risk profile is led by the continuous launch of new and successful products, new services to grow its top line, grow profits and grow overall audience and market reach.

From an industry perspective, the company is eyeing at an overall mobile market of above $100 billion with two and a half billion smart devices enabled by 2021. The company is witnessing engagement in the game raising by whopping 20% year-over-year, so that’s more more moves per day, per player. And that’s had a huge positive impact on the overall growth business.

Latest financial results: On October 31st, the company released its financial results for the quarter ended Sep 30, 2018. Zynga continues to report robust business financial led by improving operational efficiency, cost-cutting initiatives. Also, from liquidity and financial flexibility perspective, Zynga is now cash flow positive, and its cash balances being channelized into several M&A strategies. The management is focussed on both its strategic and tactic capital allocation strategy.

Q3 2018 performance overview:

Upgraded Q4 2018 Guidance:

  • Zynga is raising its fourth-quarter 2018 guidance based on the strong performance of holiday bold beats across its live service portfolio – in particular, Words With Friends, Merge Dragons! and CSR2.In addition, Wonka’s World of Candy is off to a promising start since its launch in early November.
  • As a reminder, this performance does not include any contributions from Small Giant as the transaction is expected to close effective as of January 1, 2019.

Updated Q4 2018 guidance is as follows:

Upcoming events/Near term catalyst: The Company will report its fourth quarter and full year 2018 financial results on Wednesday, February 6, 2019. At this time, Zynga will post management’s Q4 2018 Quarterly Earnings Letter, which includes Zynga’s fourth quarter and full year 2018 results and first quarter 2019 financial guidance. Analysts tracking the stock believes that ZNGA ended 2018 with a very stronger foundation for the future as it continues to make progress towards its improved margin goals and achieving margins more in line with its peers over the long term.

Recent announcements:

  • Acquisition of Small Giant Games, Creator of Hit Mobile Game Franchise Empires & Puzzles: On Dec 20th, the company announced that it has entered into an agreement to acquire Helsinki-based mobile game studio, Small Giant Games (“Small Giant”), creator of the hit franchise Empires & Puzzles. Small Giant adds an experienced team and another innovative Forever Franchise to Zynga’s live service portfolio while also expanding its new game pipeline. Small Giant is expected to be accretive to Zynga’s profitability and be a meaningful growth driver in 2019 and beyond.
  • The launch of New CSR Racing 2 Legends Features: On Nov 21st, the Company announced the launch of Legends, its biggest feature release to date in the world’s most popular mobile drag racing game, CSR Racing 2 (CSR2). Legends allow players to virtually experience restoring, customizing, and racing 16 legendary vehicles with superior power and performance, including the McLaren F1, Lamborghini Countach, Saleen S7 Twin Turbo, and Pontiac GTO “The Judge.”
  • The launch of Wonka’s World of Candy: On Nov 1st, the company announced the launch of Wonka’s World of Candy based on the iconic original feature film, “Willy Wonka and the Chocolate Factory.” Licensed by Warner Bros. Interactive Entertainment, the new game expands the Match-3 experience by incorporating exciting builder elements for players as they prepare the factory for its grand re-opening.

Analyst views and brokerage actions: Per www.marketbeat.com, Their average twelve-month price target is $4.88, suggesting that the stock has a possible upside of 8.44%. The high price target for ZNGA is $5.30, and the low-price target for ZNGA is $4.00. There are currently two sell ratings, one hold rating and 8 buy ratings for the stock, resulting in a consensus rating of “Buy.”

Below are the excerpts of recent ratings by brokerage house:

About the Company: Since its founding in 2007, Zynga’s mission has been to connect the world through games. To date, more than 1 billion people have played Zynga’s games across web and mobile, including FarmVille, Zynga Poker, Words With Friends, Hit it Rich! Slots and CSR Racing. Zynga’s games are available on a number of global platforms including Apple iOS, Google Android, and Facebook.  The company is headquartered in San Francisco, Calif., and has additional offices in the U.S., Canada, U.K., Ireland, India, Turkey and Finland. 

Financial results:

Q3 Financial Highlights

  • Revenue of $233.2 million; above the company’ guidance and up 4% year-over-year.
  • GAAP operating expenses of $149.9 million; up 8% year-over-year.
  • Net income of $10.2 million; $31.2 million above the guidance and down $7.9 million year-over-year.
  • The net increase in deferred revenue of $15.6 million; versus the guidance of a net increase of $30.0 million.
  • Bookings of $248.9 million; above the guidance and up 17% year-over-year.
  • Non-GAAP operating expenses of $128.9 million; up 6% year-over-year.
  • Adjusted EBITDA of $38.0 million; above the guidance and a decrease of $6.6 million year-over-year
  • Generated operating cash flow of $41.1 million; up 17% year-over-year.

Risk Factors & Stock Influences:

  1. The company has new games launches in the recent past along with acquisitions. The performance of this portfolio expansion would remain a key business driver and potential stock trigger for the company
  2. Despite having an extensive product portfolio, the company’s market share is significantly dependent on its top products, and if its top games do not maintain their popularity, results of operations could be harmed.
  3. The company faces significant competition in all aspects of its business. Therefore, in this competitive landscape, the company’s ability to sustain revenue growth while improving profitability would remain a challenge. 
  4. Another key risk is related to government regulations. ZNGA’s business is subject to government regulation, which mandates how it operates, increases pricing, expands contents and subjects its services to additional competitive pressures, it said, any adverse regulatory development could potentially lower market share and hence return
  5. The company operates in a rapidly changing fast paced industry.  Therefore, it must continue to launch, innovate and enhance successful games that players like and attract and retain a significant number of players to grow revenue and sustain the competitive position.

Stock Performance

  • On Friday, Feb 2nd, 2019, ZNGA closed at $4.50, with a robust average volume of 12.08 million shares exchanging hands. Market capitalization is $4.166 billion. The current RSI is 73.82
  • In the past 52 weeks, shares of ZNGA have traded as low as $3.20 and as high as $4.57
  • At $4.50, shares of ZNGA are trading above its 50-day moving average (MA) at $3.92 and above its 200-day moving average (MA) at $3.97

The present support and resistance levels for the stock are at $4.44 & $4.58 respectively.

__________________________________________________________________

About Traders News Source

Over 75% in realistic bookable gains so far in 2019

Any trader in any market would fall all over themselves to book gains like this. So, if you’ve been on the fence, perhaps it’s time to start doing some research and verify our numbers for yourself. We are constantly raising the bar and separate ourselves from the rest of the small-cap newsletters as the best in class. We know with a large following comes a large responsibility as we have everyone from the institutional investor to the beginner following our profiled securities in our newsletters. This is something we take very seriously always seeking small cap growth companies that have both near and long-term potential for our members.

View our track record, currently featured reports and updates here- https://tradersnewssource.com/traders-news-source-new-members/

***Get our small cap profiles, special situation and watch alerts in real time. We are now offering our VIP SMS/text alert service for free, simply text the word “Traders” to the phone number 25827 from your cell phone.

Pay attention, if you’re just joining us you are about to see why everyone wants to be like us.

The Traders News Team

_________________________________________________________________

Disclaimer

Traders News Source is a wholly owned subsidiary of Traders News Source LLC, herein referred to as TNS LLC.
Traders News Source has not been compensated for this report by anyone and the opinions if any are that of the author Vikas Agrawal, CFA. Author’s Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I, wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in the article.
This web site, published by TNS LLC, and is an investment newsletter that is built on the premise of assisting individual investors in learning about investing. Our goal as publishers of financial information is to provide research and analysis of investments to our subscribers. TNS LLC does not give buy or sell recommendations. We do purchase distribution rights from analyst, financial writers and bloggers for a fee that may be licensed to issue price targets and recommendations. Furthermore, we encourage you to speak to a licensed professional prior to making an investment in any type of publicly traded security.
We do sell advertising to other companies including brokerage firms, web sites, publicly traded issuers, investor relations firms, and investment publications, among others. TNS LLC makes no warranty as to the policies of these organizations, and in no way endorses their offers, services, or the content of their advertisements.
When an advertiser is a publicly traded company or a third party acting on behalf of a public company, we fully disclose all compensation in the email advertisement. Such disclosure is included in a disclosure statement in each of the advertisements sent via email.
17B Disclosure
Our reports/releases are a commercial advertisement and are for general information purposes ONLY. We are engaged in the business of marketing and advertising companies for monetary compensation. Never invest in any stock featured on our site or emails unless you can afford to lose your entire investment. The disclaimer is to be read and fully understood before using our services, joining our site or our email/blog list as well as any social networking platforms we may use.
PLEASE NOTE WELL: TNS LLC and its employees are not a Registered Investment Advisor, Broker Dealer or a member of any association for other research providers in any jurisdiction whatsoever.
Release of Liability: Through use of this website viewing or using you agree to hold TNS LLC, its operator’s owners and employees harmless and to completely release them from any and all liability due to any and all loss (monetary or otherwise), damage (monetary or otherwise), or injury (monetary or otherwise) that you may incur. The information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of the available data. TNS LLC encourages readers and investors to supplement the information in these reports with independent research and other professional advice. All information on featured companies is provided by the companies profiled or is available from public sources and TNS LLC makes no representations, warranties or guarantees as to the accuracy or completeness of the disclosure by the profiled companies. None of the materials or advertisements herein constitute offers or solicitations to purchase or sell securities of the companies profiled herein and any decision to invest in any such company or other financial decisions should not be made based upon the information provide herein. Instead TNS LLC strongly urges you conduct a complete and independent investigation of the respective companies and consideration of all pertinent risks. Readers are advised to review SEC periodic reports: Forms 10-Q, 10K, Form 8-K, insider reports, Forms 3, 4, 5 Schedule 13D.
TNS LLC is compliant with the Can Spam Act of 2003. TNS LLC does not offer such advice or analysis, and TNS LLC further urges you to consult your own independent tax, business, financial and investment advisors. Investing in micro-cap and growth securities is highly speculative and carries an extremely high degree of risk. It is possible that an investor’s investment may be lost or impaired due to the speculative nature of the companies profiled.
The Private Securities Litigation Reform Act of 1995 provides investors a ‘safe harbor’ in regard to forward-looking statements. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, goals, assumptions or future events or performance are not statements of historical fact may be “forward looking statements”. Forward looking statements are based on expectations, estimates, and projections at the time the statements are made that involve a number of risks and uncertainties which could cause actual results or events to differ materially from those presently anticipated. Forward looking statements in this action may be identified through use of words such as “projects”, “foresee”, “expects”, “will”, “anticipates”, “estimates”, “believes”, “understands”, or that by statements indicating certain actions & quote; “may”, “could”, or “might” occur.
Understand there is no guarantee past performance will be indicative of future results. In preparing this publication, TNS LLC has relied upon information supplied by its customers, publicly available information and press releases which it believes to be reliable; however, such reliability cannot be guaranteed. Investors should not rely on the information contained in this website. Rather, investors should use the information contained in this website as a starting point for doing additional independent research on the featured companies. The advertisements in this website are believed to be reliable, however, TNS LLC and its owners, affiliates, subsidiaries, officers, directors, representatives and agents disclaim any liability as to the completeness or accuracy of the information contained in any advertisement and for any omissions of materials facts from such advertisement. TNS LLC is not responsible for any claims made by the companies advertised herein, nor is TNS LLC responsible for any other promotional firm, its program or its structure.