Zynga (ZNGA) Q3 Earnings: What’s in the Cards this Time?

Zynga Inc. ZNGA is set to report third-quarter 2016 results on Nov 2. Last quarter, the company delivered in-line earnings. On an average, Zynga has delivered a positive earnings surprise of 35.00% over the last four quarters.

Let’s see how things are shaping up for the upcoming announcement.

Factors at Play

Zynga has been seeing strength in the mobile game market. In addition, its cost cutting initiatives is a positive. We expect the top line to be driven by its popular games like Words With Friends and Poker. Even CSR Racing 2, which was released at the end of the second quarter, is expected to be an important growth driver.

However, the company has been seeing a slowdown in its user growth for a while, which remains a major concern. Moreover, a slowing web business along with intensifying competition from the likes of Glu Mobile GLUU, Electronic Arts and Nintendo’s Pokémon Go remain concerns.

For the third quarter of 2016, the company expects revenues in a range of $170 million to $180 million.

Earnings Whispers

Our proven model does not conclusively show that Zynga is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below.

Zacks ESP: Zynga has an Earnings ESP of -100.00% as the Most Accurate Estimate stands at a loss of 4 cents while the Zacks Consensus Estimate is pegged at a loss of 2 cents. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

Zacks Rank: Zynga has a Zacks Rank #3, which when combined with a negative 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.

Stocks to Consider

Here are a couple of stocks that, as per our model, also have the right combination of elements to post an earnings beat this quarter:

Stratasys Ltd. SSYS with an Earnings ESP of +41.67% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Inovalon Holdings, Inc. INOV with an Earnings ESP of +50.00% and a Zacks Rank #2

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