Zynga Inc. ZNGA is set to report second-quarter 2015 results on Aug 6. Last quarter, the company delivered positive earnings surprise of 28.57%. On an average, Zynga has delivered a positive earnings surprise of 15.48% over the last four quarters.
Let’s see how things are shaping up for the upcoming announcement.
Factors at Play
Zynga is well positioned to benefit from the strong mobile game market going forward. According to research reports, 2015 industry revenues from mobile games are expected to grow 16% year over year to reach $3.04 billon. In addition, we believe that the games launched in 2015 will drive top-line growth in the to-be-reported quarter.
However, intensifying competition from Glu Mobile GLUU and Electronic Arts EA remains a headwind. The resurgence in physical game sales due to next generation 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. This 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 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 6 cents.
Zacks Rank: Zynga has a Zacks Rank #3 (Hold), which when combined with a 0.00% ESP, makes surprise prediction difficult.
We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stock to Consider
Here is another company which can be considered, as our model shows that it has the right combination of elements to post an earnings beat this quarter:
Amtech Systems Inc. ASYS, with an Earnings ESP of +8.00% and a Zacks Rank #3.
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