Zynga Inc (ZNGA) 4Q Earnings To Be In Line: Wedbush

Zynga Inc (ZNGA) 4Q Earnings To Be In Line: Wedbush

Zynga Inc (NASDAQ:ZNGA) will report its fourth quarter earnings after the market close on Tuesday, February 5. A report from Wedbush, projects a revenue of $275 million against the consensus of $212 million, bookings of $214 million against the implied guidance of $204. On EBITDA report, they predicted  $(7.2) million compared to implied guidance of $(16) to (6) million.

In November, last year, the game maker announced various management changes and also re-affirmed outlook. Mark Vranesh is the newly appointed CFO.  The report believes that the much needed promotions of David Ko, Barry Cottle and Steven Chiang will strengthen the management team. All these executives have loads of experience in the video game industry and will definitely help the game maker regain its investor’s confidence.

In November, Zynga Inc (NASDAQ:ZNGA) and Facebook Inc (NASDAQ:FB) announced amendments to the Developer Addendums originally agreed upon in 2010. As per the new agreement, Zynga will have more flexibility with payments and would enjoy a greater platform, while Facebook will now be able to  develop its own games and host Zynga’s real money gambling and acquired games. The new agreement is highly beneficial for Zynga as it will now have “an incentive to expand the reach of its most popular social games beyond Facebook and Zynga.com with additional payment options.”

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To bring back the lost glory, Zynga’s management team have taken numerous steps, including streamlining operations and the optimum utilization of resources. The company axed its full time workforce by 5 percent, including a cut in staffing levels at its Austin studio, and also closed its Boston, Japan and U.K. studios. Zynga also trimmed its advertising budget, data hosting, outside services, and its product pipeline to save on costs. All these efforts are expected to generate pre-tax savings of $15 –$ 20 million in the fourth quarter, excluding $8 to $12 million in pre-tax restructuring charges during the quarter.

On Zynga Inc (NASDAQ:ZNGA)’s stock price, despite cost cuts and the new share repurchase program, the report expects it to be ‘somewhat constrained’ over the next few quarters until the success from the turnaround plan is visible to the investors. “We expect Zynga’s share price to remain somewhat constrained over the next few quarters until management and investors can judge the success of the turnaround plan,” says the report.

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