Wedbush Sets Expectations on Three Earnings Plays: Zynga Inc (ZNGA), LinkedIn Corp (LNKD), King Digital Entertainment PLC (KING)

Wedbush analyst Michael Pachter came out today with a forecast on the gaming app company giant Zynga Inc (NASDAQ:ZNGA), professional networking giant LinkedIn Corp (NYSE:LNKD) and mobile game giant King Digital Entertainment PLC (NYSE:KING), ahead of their upcoming earnings releases.

Zynga Inc

With Zynga preparing to release fiscal third-quarter earnings on Tuesday, November 3, Wedbush’s Michael Pachter reiterated an Outperform rating on the stock, with a $6.00 price target, which represents a potential upside of 153% from where the stock is currently trading.

Pachter noted, “We expect Zynga to exceed consensus estimates driven primarily by its slots games. Our current estimates are for bookings of $170 million and EPS of $(0.01), versus consensus of $170 million and $(0.01), and guidance of $155 – 170 million and $(0.02) – (0.01). We believe that sequential online revenue growth for Hit It Rich! Slots and Wizard of Oz Slots offset any declines in Zynga Poker and the FarmVille games, with any catalog weakness offset by May release FarmVille: Harvest Swap.”

“We expect initial Q4 bookings guidance that is roughly in-line with consensus at the high-end. We expect a range of $175 – 190 million, with modest contributions from expected Q4 releases CSR2, Dawn of Titans, and the new slots title,” the analyst continued.

The analyst concluded, “Notwithstanding our optimism, Zynga is likely to remain a “show me” story until it demonstrates that it can grow bookings. The company must deliver “solid singles” and an occasional double before investors will bid its shares higher.”

According to, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Michael Pachter has a total average return of -1.3% and a 44% success rate. Pachter has a -14.7% average return when recommending ZNGA, and is ranked #3143 out of 3801 analysts.

Out of the 7 analysts polled by TipRanks in the last 3 months, 2 rate Zynga stock a Buy, 3 rate the stock a Hold and 2 recommend a Sell. With a return potential of 43%, the stock’s consensus target price stands at $3.41.

LinkedIn Corp

LinkedIn is scheduled to report third-quarter results after the market close on Thursday, October 29, and host a conference call at 2:00pm PT. Pachter expects Q3 results to exceed consensus driven by Talent Solutions and Marketing Solutions strength.

The analyst wrote, “Our current estimates are for revenue of $765 million, adjusted EBITDA of $153 million, and EPS of $0.47, versus consensus of $756 million, $153 million, and $0.46, and guidance of $745 – 750 million, $146 – 148 million, and $0.43. We expect Talent Solutions to benefit from more normalized churn and the Q1 customer re-segmentation that resulted in increased ARPU.”

Furthermore, “We expect LinkedIn to pass-through Q3 upside to full year guidance for revenue of $2.94 billion, adjusted EBITDA of $665 million, and non-GAAP EPS of $2.19. We believe management will be more comfortable in its outlook with yearend fast approaching, less uncertainty over the financial impact of the acquisition, and less upheaval from customer re-segmentation.”

Pachter reiterated a Neutral rating on LinkedIn shares, with a price target of $200, which implies a downside of 5% from current levels.

Out of the 19 analysts polled by TipRanks in the last 3 months, 14 rate LinkedIn stock a Buy, while 5 rate the stock a Hold. With a return potential of 22.58%, the stock’s consensus target price stands at $259.19.

King Digital Entertainment PLC

King Digital will be reporting fiscal third-quarter earnings on Wednesday, November 4 after the market close. Pachter expects Q3 bookings at or above the high-end of the guidance range, largely a reflection of a seemingly conservative outlook.

Pachter wrote, “Our current estimates are for adjusted revenue of $462 million, bookings of $490 million, and EPS of $0.40, compared with consensus for adjusted revenue of $455 million and EPS of $0.38, and guidance for bookings of $460 – 485 million. After delivering bookings of $604 million and $529 million in Q1 and Q2, respectively, management guided down significantly q-o-q, providing the company with some breathing room as the maturation of Candy Crush Saga (“CCS”) and its other games continues.”

Although management previously disclosed that it expected Q4 bookings to be in-line with Q3 (implying something in the range of $460 – 485 million again), we expect its existing games to largely deteriorate from a bookings perspective going forward. August release Paradise Bay appears to be performing well so far in Q4, but it is unclear if the boost is temporary (potentially from additional marketing) or whether it will be sustained over the long-term.” the analyst continued.

Pachter reiterated an Outperform rating on King Digital shares, with a price target of $18, which implies an upside of 22% from current levels. Out of the 5 analysts polled by TipRanks, 1 rate King Digital stock a Buy, while 4 rate the stock a Hold. With a return potential of 10.81%, the stock’s consensus target price stands at $16.40.




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