Zynga Inc (ZNGA) Estimates Lowered Ahead Of Earnings Report

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Zynga Inc (NASDAQ:ZNGA) shares slumped almost 4 percent in trading Monday, a day ahead of the company’s next earnings report. The tech company will release its report Tuesday after the closing bell. Analysts at Credit Suisse Group AG (ADR) (NYSE:CS) have “modestly” lowered their expectations for Zynga’s fourth quarter results. Like analysts at Sterne Agee, those at Credit Suisse don’t expect much out of Zynga Inc (NASDAQ:ZNGA)’s fourth quarter report.

In a report issued to investors on Monday, Credit Suisse Group AG (ADR) (NYSE:CS) analysts maintained their Underperform rating and $3 per share target price for the company’s stock. They have also lowered their estimates from $217.4 million to $214.4 million. The company guided between $204 and $214 million.

Credit Suisse analysts said they believe Zynga Inc (NASDAQ:ZNGA) “still has much optionality going forward,” but they see developments like expansion into the midcore segment and money gaming initiatives “very much a work in progress.” Thus they expect that shares of Zynga will “lag” versus the stock of its “online video game peers in the near-to-medium term.”

The analysts updated their cohort analysis for the company’s 2012 releases as well, indicating that they expect the company’s user engagement decay rate to be similar to that of 2011, which means that the company could “struggle near term to hold on to its user base.” They said monthly active users data from AppData seems to indicate that the company has had “softer engagement” during the fourth quarter.

One of the reasons so many investors may be down about Zynga Inc (NASDAQ:ZNGA) right now is the impending end of the company’s favorable relationship with Facebook Inc (NASDAQ:FB). That relationship ends in March, so clearly investors are waiting to see what’s going to happen to Zynga Inc (NASDAQ:ZNGA), which now must struggle to stand on its own instead of riding along on the back of Facebook Inc (NASDAQ:FB).

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