Zynga is set to post its first-quarter earnings on May 7th, and Wedbush analyst Michael Pachter has developed his estimates. Pachter reiterates his Outperform rating on the stock with a price target of $6.00, noting an upside of 145% from current levels.
Zynga Q1: What to expect?
Pachter estimates that the first-quarter results will be towards the high-end of the firm’s guidance range, and expects revenue to come in at $165 million, bookings at $150 million, adjusted EBITDA at $(15) million and earnings per share of $(0.02). Guidance for revenue is between $155 and 165 million, bookings between $140 and 150 million, adjusted EBITDA of $(25)-(15) million and non-GAAP EPS of $(0.03)-(0.02).
Pachter believes the “Initial Q2:15 guidance will likely mirror Q1:15 guidance.” The social game maker’s “existing portfolio of games will likely continue to trend incrementally lower in Q2,” and the probable rollovers of titles such as Empire & Allies late in the quarter could drive monetization in the future.
Mobile initiative to rescue
Zynga has largely failed to perform to expectations since its IPO, but the firm may be poised to turn around on the back of mobile initiatives. The company is eying growth in the mobile gaming along with reducing dependence on the old titles such as Farmville. This implies that the shares of the company are probably gearing to move up from here, suggesting a good entry point for the investors. Don Mattrick’s exit and Mark Pincus comeback might concern some investors, but overall the company seems to be well positioned to rebound on the back of mobile gaming initiatives, says a report from Gurufocus.
Zynga is hoping its top games such as Empire & Allies are well received by users. Clash of Clans, a game that was launched two years ago, is the only 2.5D graphical game by Zynga. At the time of launch, single core or dual core SoCs smartphones were not efficient enough as they had poor 3D graphic processors. However, current smartphones are better and more powerful, which will be an advantage for Zynga in launching visually intense games such as Empire & Allies.
In pre-market trading Friday, Zynga shares were up 1.22% to $2.48, and year to date the stock is down almost 10%.