Mobile video game company Zynga Inc (NASDAQ:ZNGA) surprised analysts and investors alike when it beat second quarter earnings expectations on August 6, resulting in a 5% increase in pre-market trading the morning after.
Highlights from the earnings report include a non-GAAP loss of ($0.01) per share on $199.91 million in revenue, beating the Street’s estimate of ($0.02) loss per share on $188.30 million in revenue.
The company’s total bookings grew 4% year-over-year to $174 million and beat the high-end of Zynga’s management guidance. The company’s mobile bookings came in at $115 million, contributing to 66% of Zynga’s total bookings and marking a 30% increase year-over-year.
On a negative note, Zynga posted 21 million daily average users, marking a 23% year-over-year decrease and a 15% decrease from the last quarter. Monthly average users came in at 83 million, down 32% year-over-year and down 18% from the last quarter.
However, during the quarter Zynga secured a multi-year agreement with Warner Bros to license Willy Wonka and the Chocolate Factory for its popular casino franchise, which also includes Wizard of Oz Slots and Hit It Rich. The agreement is expected to help Zynga increase bookings and monetization efforts.
Mark Pincus, CEO and Chairman of Zynga, said of the earnings, “Our teams have been executing well and delivered strong Q2 results while also making significant progress against our best growth opportunities. In terms of our core franchises – FarmVille, Slots, Poker and Words With Friends – we beat our expectations and the teams did a good job delivering value for our players. We also launched Empires & Allies and FarmVille: Harvest Swap in Q2, and are excited for the upcoming launches of Dawn of Titans, CSR2 and our new Slots game later this year.”
Credit Suisse analyst Stephen Ju weighed in on Zynga on August 7, commending the company’s improved monetization efforts. However, the analyst has an Underperform rating on the stock with a price target of $2.94.
Stephen Ju has rated Zynga 6 times since 2009, earning a 67% success rate recommending the company and a +8.6% average return per Zynga recommendation when measured over a one-year horizon and no benchmark. Overall, he has a 63% success rate recommending stocks and a +18.4% average return per recommendation.
On the other hand, Wedbush analyst Michael Pachter sees “a light at the end of the tunnel” for Zynga and maintained an Outperform rating on the stock with a price target of $6 on August 7. The analyst noted, “With the launch of two games in Q2 and with three games coming in Q4, we expect player metrics to stabilize by year-end and begin to grow again in 2016.” Furthermore, Pachter believes “that the robust Q4 launch slate has the potential to drive revenues significantly higher sequentially, and to allow for bookings growth in 2016.”
Michael Pachter has rated Zynga 24 times since 2009, earning a 29% success rate recommending the company and a -12.6% average loss per recommendation when measured over a one-year horizon and no benchmark. Overall, he has a 48% success rate recommending stocks and a -1.4% average loss per recommendation.
Out of 5 analysts polled by TipRanks within the last 3 months, 2 are bullish on Zynga, 2 are neutral, and 1 is bearish. The average 12-month price target for Zynga is $3.98, marking a 50.76% potential upside from where the stock last closed. On average, the all-analyst consensus for Zynga is Hold.