Zynga Inc (NASDAQ:ZNGA) will post third quarter results after the market closes today. Sterne Agee analysts Arvind Bhatia and Brett Strauser expect the numbers to be in line with management’s conservative guidance. Analysts believe that stocks are showing minimum rebound due to technical factors and not due to any improvement in fundamental metrics.
The balance sheet of Zynga Inc (NASDAQ:ZNGA) provides a shield against any minimum downturn and Don Mattrick is expected to revive the company from current levels in the long term.
Potential risk to 4Q estimates
For the third quarter, Zynga Inc (NASDAQ:ZNGA) is expected to post bookings / adjusted EBITDA within the range of $125-$150 million to break even. Analysts hold the view that the guidance given by management for 20% to 33% sequential decline in bookings is conservative.
Quant ESG With PanAgora Asset Management’s George Mussalli
ValueWalk's Raul Panganiban interviews George Mussalli, Chief Investment Officer and Head of Equity Research at PanAgora Asset Management. In this epispode, they discuss quant ESG as well as PanAgora’s unique approach to it. The following is a computer generated transcript and may contain some errors. Q3 2020 hedge fund letters, conferences and more Interview . Read More
Analysts note that there could be a potential risk to the fourth quarter and to the 2014 consensus estimates. Quarter to date traffic seems to deplete in the fourth quarter, however, consensus 2014 bookings estimates suggest increasing traffic in the fourth quarter. Also, consensus 2014 bookings/adjusted EBITDA estimates show substantial growth in traffic from current trends, which analysts say “seem risky.”
For the first three weeks of the fourth quarter, total traffic has come down sequentially, but consensus estimates for the fourth quarter bookings/adjusted EBITDA estimates is expected to be $154 million, which is an uptrend in the business compared to consensus third quarter bookings/adjusted estimates of $144 million.
Possible reasons for upside in Zynga stocks
Zynga Inc (NASDAQ:ZNGA) stocks have shown slight upside recently, which could be due to expectation that King (a leading game developer on Facebook) will bring its IPO. Analysts also believe an increase in internet stock valuation in general and social media stocks along with technical buying as shares cross their 50 and 200-day moving average may have also pushed the stock higher.
Zynga preserving cash
Total cash balance for Zynga stands at $1.5 billion or $1.90 per share as of the end of the second quarter. There was no long term debt in the book. Zynga Inc (NASDAQ:ZNGA) has the ownership of its headquarters, which is valued more than $250 million. In the second quarter, free cash flow came in at $14 million and analysts feel that Zynga is more inclined towards preserving cash on the balance sheet by bringing down capital expenditure and head count.
CEO Don Mattrick is expected to cut on the cost structure of the company and find the next big thing. It is expected that Mattrick will discuss his short term plans and long term strategy for the company during the earnings call.
Analysts have assigned a Neutral rating to Zynga Inc (NASDAQ:ZNGA).