Zynga, Inc. (ZNGA) is set to report third quarter 2014 results on Nov 6. Last quarter, it posted a 33.33% positive surprise. The company has posted an average positive earnings surprise of 37.14% over the past four quarters.
Let’s see how things are shaping up for this announcement.
Growth Factors This Past Quarter
We believe that the recent launch of new games including the likes of NFL Showdown and Zynga Poker will drive top-line growth in the near term.
Zynga is well positioned to benefit from the strong mobile game market, going forward. According to Newzoo, industry revenues from mobile games are expected to jump 42% year over year in 2014.
However, growing competition from the likes of Gluu Mobile, King Digital (KING), Rovio, DeNA, Gree and established players like Electronic Arts (EA) will make it difficult for the company to register strong growth 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 of #1, 2 or 3 for this to happen. That is not the case here as you will see below.
Zacks ESP: Both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 5 cents. Hence, the difference is of 0.00%.
Zacks Rank #3 (Hold): Though Zacks Ranks #1, 2 or 3 increase the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.
We caution against stocks with Zacks Ranks #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:
- The Walt Disney Company (DIS) with an Earnings ESP of +1.14% and a Zacks Rank #2 (Buy)
- Gartner Inc. (IT) with an Earnings ESP of +2.56% and a Zacks Rank #3 (Hold)
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