A Report from Canaccord Financial Inc. (TSE:CF) expects Zynga Inc (NASDAQ:ZNGA) to meet its booking guidance. Since there is no clarity over the new game roll-over and how it will perform, therefore, as per the report, there can be some potential risks attached in the second quarter bookings in comparison to current expectations.
Marathon Partners Equity Management, the equity long/short hedge fund founded in 1997, added 8.03% in the second quarter of 2021. Q2 2021 hedge fund letters, conferences and more According to a copy of the hedge fund's second-quarter investor update, which ValueWalk has been able to review, the firm returned 3.24% net in April, 0.12% in Read More
Why such expectations?
According to the data collected from Appdata, Facebook Inc (NASDAQ:FB) DAU for many of the Zynga Inc (NASDAQ:ZNGA) core games dipped down 10 percent in the first quarter. As per the data, the ABPU or monetization was also on the decline in the fourth quarter compared to the third quarter. Thus, it can be drawn out confidently that monetization in the quarter 1 will decline as against quarter 4, says the report.
The most popular games of Zynga Inc (NASDAQ:ZNGA) like Zynga Poker, Words with Friends, and Farmville 2 contributed DAU’s that were flat to slightly up, which is a positive signal. The latest one from Zynga, Coaster Ville, which was launched in the fourth quarter contributed average to the DAU at 2.68 mm in the first quarter.
Zynga.com, which has been tracked regularly by Canaccord Financial Inc. (TSE:CF), shows that the game maker has put some effort to add some more features in the platform due to which player engagements have been on higher levels at Zynga.com when compared to the players on Facebook. However, the monetization of Zynga.com is still in a very nascent stage.
The mobile gaming index recorded some instability in the quarter coming in at -16 percent for January, +6 percent for February and -11 percent for March. The index value on an average for this quarter remained unchanged compared to the fourth quarter of Fiscal 2012, although there was no new game launched in the current quarter.
Zynga & RMG
In February, Nevada and New Jersey approved the bill for legalizing online gambling. Zynga Inc (NASDAQ:ZNGA) applied for the license in Nevada, in December, which could take up to 12-18 months to be issued. Apart from these two states, online gambling is legal in the state of Delaware, and the several states are scrutinizing the idea of legalizing online gambling, says the report. Though RMG could be an attractive opportunity, but in the near term “financial implications are not meaningful for the company,” believes the report.
For the first quarter, Facebook Inc (NASDAQ:FB) DAU declined by 11 percent, and the mobile was almost flat. Therefore, the bookings for Zynga Inc (NASDAQ:ZNGA) are expected to decline 22 percent. According to past trends there is less but visible correlation between DAUs and bookings. The margin of the gaming company is looking good reflecting the fact that the company has the potential of controlling costs.
According to the collective estimates, the bookings from Q2-Q4 are expected at $260 million. The increase in the booking will mainly be fueled by launch of new games, but there are still shadows looming regarding the success and popularity of the games.