What To Expect From Zynga’s Q1?

by Trefis Team
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Zynga (NASDAQ: ZNGA) is scheduled to report its Q1 2021 results on Wednesday, May 5. We expect the company to likely post revenue and earnings above the consensus estimates, primarily led by continued growth in the company’s key franchises – Empires & Puzzles and Merge Dragons!  Zynga should see an overall pickup in demand due to higher gaming engagement levels seen over the recent quarters.  We expect the company to navigate well based on these trends over the latest quarter.

Furthermore, our forecast indicates that Zynga’s valuation is $14 per share, which is 31% above the current market price of around $11. Our interactive dashboard analysis on Zynga Pre-Earnings has additional details.

(1) Revenues expected to be slightly above the consensus estimates

Trefis estimates Zynga’s Q1 2021 revenues to be around $690 million, modestly above the $686 million consensus estimate. Despite the economies opening up with vaccination programs underway in multiple countries, the user engagement levels for gaming has remained on the higher side, and Zynga, in particular, has seen higher user engagement led by its recently acquired gaming portfolios, including that of Rollic, which was acquired earlier this year, and it should bolster the overall top-line growth. Zynga’s Q4 2020 total bookings (includes change in deferred revenue along with total revenue) were up a solid 61% y-o-y to $699 million, primarily driven by higher user engagement levels for its top games, including Merge Dragons!  Our dashboard on Zynga Revenues offers more details on the company’s segments.

2) EPS likely to be slightly above the consensus estimates

Zynga’s Q1 2021 adjusted earnings per share (EPS) is expected to be $0.10 per Trefis analysis, slightly above the consensus estimate of $0.09. The company’s net loss of $53 million in Q4 2020 compares with a $3.5 million loss in the prior year quarter. However, on an adjusted basis, the company reported earnings of $85 million or $0.09 on a per share basis. For the full year 2021, we expect the adjusted EPS to be higher at $0.40 compared to $0.35 in 2020.

(3) Stock price estimate 31% above the current market price

Going by our Zynga’s Valuation, with an EPS estimate of $0.40 and a P/E multiple of 35x in 2021, this translates into a price of $14, which is 31% above the current market price of around $11. In fact, at the current market price of $11, ZNGA stock is trading at just 27x its 2021 EPS estimate of $0.40. While the 27x figure is comparable with some of its peers including Activision Blizzard and Electronic Arts, we believe that Zynga deserves a higher P/E multiple given the strong revenue and earnings growth delivered over the recent past, a trend expected to continue going forward, as well.

Note: P/E Multiples are based on Share Price at the end of the year and reported (or expected) Adjusted Earnings for the full year.

While ZNGA stock can see higher levels, it is helpful to see how its peers stack up. Check out ATVI stock comparison with its peers to see how Activision Blizzard compares against peers on metrics that matter. You can find more such useful comparisons on Peer Comparisons.

See all Trefis Price Estimates and Download Trefis Data here

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