Zynga Inc PT, Estimates Dropped Owing To Dismal 2Q

Zynga Inc (NASDAQ:ZNGA) posted below estimated second-quarter earnings, as well as, bookings.  Non-GAAP EPS came in at $0.00 compared to the consensus estimate of $0.00 and guidance of $0.00-0.01. Analysts agree that the game delays have forced the company to lower its full year revenue/adjusted EBITDA guidance.

Zynga Inc PT, Estimates Dropped Owing To Dismal 2Q

Full-year guidance lowered

While the major revenue generating titles of the company performed well, there was no new title except for the FarmVille 2 on mobile. Zynga has revised its financial year 2014 guidance and now expects lower numbers due to delay in the new games and features launch.  For the full fiscal 2014, the company is expecting bookings in the range of $695-$725 million from $770-810 million previously. Adjusted EBITDA is expected to come in the range of $40-$60 million from $70 – $100 million previously, and for EPS is guided at $(0.01) – 0.00 from $0.01 – 0.03 earlier.

The Gaming Company posted bookings at $175 million compared to the Wedbush analyst’s estimate of $195 million, consensus estimate of $191 million and guidance of $175-195 million. Analysts at Sterne Agee were expecting bookings of $186.5 million.

Wedbush analysts have maintained Outperform rating on Zynga. But have the price target to $6 from $7. Sterne Agee has a Neutral rating on the social game maker, and has lowered their estimates “to be in line with guidance.”

Few positives for Zynga

In a report dated August 8, 2014, Sterne Agee analysts Arvind Bhatia and Brett Strauser noted that Zynga management did update about the new releases, a development most awaited by the Wall Street. Around 50% of the total R&D budget will be spent on the recently launched or new games by the end of 2014. According to analysts, Zynga did manage to hit some surprise notes by announcing a collaboration with NFL, Tiger Woods and Warner Bros. for its upcoming games.

“While specifics are not known, we can assume these games will carry lower margin profiles than Zynga’s wholly owned IP,” believe Sterne Agee analysts.

In a report dated August 8, 2014, Wedbush Michael Pachter, Nick McKay and Nick Citrin, noted that Zynga will march ahead on growth trajectory by $15 million per quarter sequentially for the future owing to the industry growth. This reflects that Zynga can generate $731 million in bookings per year without releasing any new game. Zynga has substantially increased its monthly unique players, surging to 1.7 million in the second-quarter compared to 1.4 million in the first-quarter.