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Zynga Q3 Earnings: Can NasdaqGS:ZNGA Hit Its $0.09 EPS Target?

in EARNINGS/INVESTING IDEAS by

Zynga Inc. (NasdaqGS:ZNGA) is scheduled to report Q3 earnings results on November 4, 2020.

The company is expected to report earnings of $0.09/share on revenue of $453.6 million. The consensus earnings per share (EPS) of $0.09/share is based on a poll of 14 analysts and represents a growth in eps of 83.9% over the same quarter last year, when the company reported earnings of $0.05/share.

The revenue forecast of $453.6 million based on a poll of 12 analysts implies a year-over-year (YoY) growth in revenue of 31.4%. Last year the company reported $345.3 million in revenue for the quarter.

Expected to report EPS growth of 83.9% for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $453.62 $345.29 31.4%
EPS $0.09 $0.05 83.9%

Earnings Call Trends

Historically, management has exceeded analyst expectations 7 out of the last 8 tracked quarters, and met expectations 2 quarters.

What are your expectations from Zynga Inc. for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 $0.07 $0.10 50.9% Beat
Q1, 2020 $0.06 $0.06 0% Met
Q4, 2019 $0.06 $0.09 54.5% Beat
Q3, 2019 $0.05 $0.05 0% Met
Q2, 2019 $0.05 $0.06 24.8% Beat
Q1, 2019 $0.05 $0.07 52.4% Beat
Q4, 2018 $0.04 $0.05 24.1% Beat
Q3, 2018 $0.04 $0.05 34.8% Beat

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2020, the stock price reacted by falling −2.4%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
August 5, 2020 $10.19 $9.95 −2.4% Decline
May 6, 2020 $7.62 $7.64 0.3% Increase
February 5, 2020 $6.08 $6.71 10.4% Increase
October 30, 2019 $6.07 $6.17 1.6% Increase

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −2.54, the model suggests that the company is not likely to be an earnings manipulator. A value of −2.54 implies a 0.5% chance of earnings manipulation.

Fundamentals And Technical Analysis

Zynga Inc. is currently trading at $9.36/share, down −1.0% for the day. The company is trading at approximately 87.4% of its 52-week high of $10.69/share. The company’s stock price is down −5.9% since the last earnings report and up 2.7% over the previous week. The company’s 14 Day Relative Price Index (RSI) of 62.26 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NasdaqGS:ZNGA Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of −362.60 and a forward P/E multiple of 27.91.

Zynga Inc.’s current share price also implies a price-to-book (P/B) multiple of 5.77. The following table summarizes some other key fundamental ratios:

Data as of October 28, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 30, 2020
Stock Price (Current) $9.36
P/E Ratio −362.6x
P/E Ratio (Fwd) 27.9x
PEG Ratio −4.4
Total Debt / Total Capital 6.6%
Levered Free Cash Flow $247.5 million
EV / EBITDA −1,665.0x

Finbox

Zynga Inc. is a large-cap stock with a market capitalization of $10.163 billion and a total enterprise value of $9.328 billion. The company operates in the Communication Services sector and the Entertainment industry.

Zynga Inc. develops, markets, and operates social games as live services in the United States and internationally. The company’s games are played on mobile platforms, such as Apple iOS and Google’s Android operating systems, as well as on social networking sites, such as Facebook and Snapchat. It also provides advertising services comprising mobile advertisements, engagement advertisements and offers, and branded virtual items and sponsorships to advertising networks, agencies, and brokers; and licenses its own brands. The company was formerly known as Zynga Game Network Inc. and changed its name to Zynga Inc. in November 2010. Zynga Inc. was founded in 2007 and is headquartered in San Francisco, California.

Expertise: financial technology, analyzing market trends. Brian is a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to research stock fundamentals. Brian’s background is in physics & computer science and previously worked as a software engineer at GE Healthcare. He enjoys applying his expertise in technology to help find market trends that impact investors. Brian can be reached at brian@finbox.io or at +1 (516) 778-6257.

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