Zynga Inc. (ZNGA) is set to report second-quarter 2014 results on Aug 7. In the previous quarter, the company reported a loss of 4 cents, a penny narrower than the Zacks Consensus Estimate. On average, Zynga has delivered positive earnings surprise of 39.53% in the last four quarters.
Let’s see how things are shaping up for this quarter.
Factors to Consider This Quarter
Zynga is expected to grow in the near term on the back of its innovative product pipeline and improving position in the mobile gaming sector. Bookings are projected in the range of $175.0–$195.0 million. The company expects to generate revenues between $140 million and $160 million in the second quarter, lower than the Zacks Consensus Estimate of $192.0 million.
However, intensifying competition from the likes of King Digital, Glu Mobile and Electronic Arts remains the headwind. The resurgence in physical game sales due to Next Gen consoles will be a significant headwind at least in the near term.
Earnings Whispers?
Our proven model does not conclusively show that Zynga is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here as you will see below.
Zacks ESP: Zynga currently has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 3 cents.
Zacks Rank: Zynga’s Zacks Rank #2 (Buy) increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings beat.
We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
Cognizant Technology Solutions (CTSH), with an Earnings ESP of +5.08% and a Zacks Rank #1 (Strong Buy).
Super Micro Computer (SMCI), with an Earnings ESP of +2.78% and a Zacks Rank #1.
Semiconductor Manufacturing International Corp. (SMI), with an Earnings ESP of +33.33% and a Zacks Rank #2 (Buy).
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