Q4 Preview: Analysts Remain Optimistic on Zynga’s (ZNGA) Growth Outlook

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ZNGA Hot Sheet

Rating Summary:
7 Buy, 8 Hold, 3 Sell

Rating Trend: = Flat

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Up: 0 | Down: 0 | New: 0

Shares of Zynga Inc. (Nasdaq: ZNGA) are trading up nearly 1.4 percent Monday ahead of the release of its fourth-quarter results after the closing bell on February 14th. This will be the first earnings report since Zynga has been a public company.

The Wall Street quarterly consensus for Zynga Inc. is $0.03 per share in earnings on $300.8 million in sales.

For the fiscal year 2011, analysts on the Street are currently estimating $0.19 per share in earnings on $1.15 billion in total sales.

The fourth quarter conference call is scheduled for 5:00 pm ET. Dial-in: 800-537-0745, Conference ID: 46506257.

According to data from Bloomberg, shares of Zynga Inc. have 11 Buy ratings, six Hold ratings and one Sell rating. The average price target on shares of ZNGA is $11.50 with a range from $7 to $14.

Analyst Comments:

JPMorgan initiated coverage on Zynga on January 25th with an Overweight rating and $12 price target. The firm highlighted a new U.S. Justice Department memo on the legalization of online gambling as possibly opening the door for Zynga to enter a $3.5-$5 billion market. Due to the popularity and success of its Zynga Poker game, JPMorgan believes the company has a great opportunity to gain from the new regulations.

JPMorgan is forecasting booking growth of 26 percent in 2012, followed by 23 percent growth in 2013. The firm believes this growth will be largely driven by the launch of new games. For the upcoming quarterly results, JPMorgan estimates earnings will total $0.03 per share.
On February 9th Wedbush raised its price target on the company from $12.50 to $14. The firm noted stronger-than-expected usage. For the quarter, the firm estimates earnings will be $0.03 per share on $335 million in total sales.

An analyst at Wedbush noted, “In October, Facebook changed its methodology for calculating MAUs. As a result, user data for all social games developers that use the Facebook platform dropped precipitously according to www.appdata.com. Adjusting prior periods for the Facebook change, we estimate MAUs averaged 215 million in December versus Q3 adjusted MAUs of 183 million, an increase of 17%, above our sequential Facebook gaming revenue growth estimate of roughly flat.”

Wedbush reaffirmed its Outperform rating on the company ahead of the release.
Goldman Sachs initiated coverage on the company back on January 25 with a Buy rating and $13 price target. “While the early stage nature of the business means we will likely see significant volatility as the model evolves, competition comes and goes, and opportunities emerge,” highlights an analyst at Goldman, “we believe Zynga has the competitive advantages, management, and scale to capitalize on these opportunities.”

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