What to expect from Zynga’s first quarter?

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Zynga (NASDAQ: ZNGA) is expected to release its first quarter 2021 results on Wednesday, May 5. We expect the company to likely post revenue and profits above consensus estimates, primarily driven by the continued growth of the company’s main franchises – Empires & Puzzles and Merge the Dragons! Zynga
ZNGA
is expected to see an overall recovery in demand due to the higher levels of gaming engagement seen in recent quarters. We expect the company to navigate well based on these trends in the last quarter.

Additionally, 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) Expected revenue slightly higher than consensus estimates

Trefis estimates Zynga’s first quarter 2021 revenue to be around $ 690 million, slightly above the consensus estimate of $ 686 million. Despite opening economies with ongoing vaccination programs in several countries, user engagement levels for games have remained higher, and Zynga, in particular, has seen higher user engagement through its wallets. recently acquired games, including that of Rollic, which was acquired earlier this year, and is expected to support overall revenue growth. Zynga’s total bookings for the fourth quarter of 2020 (including the change in deferred revenue and total revenue) grew 61% year-on-year to $ 699 million, mainly due to higher user engagement levels for its best games, including Merge Dragons! Our dashboard on Zynga revenue offers more details on the business segments.

2) EPS likely to be slightly higher than consensus estimates

Zynga’s adjusted earnings per share for the first quarter of 2021 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 the fourth quarter of 2020 compares to a loss of $ 3.5 million in the previous year quarter. However, on an adjusted basis, the company reported earnings of $ 85 million or $ 0.09 per share. For the full year 2021, we expect Adjusted EPS will be higher at $ 0.40 compared to $ 0.35 in 2020.

(3) Estimate of the share price 31% above the current market price

Through our Zynga’s review, with an EPS estimate of $ 0.40 and a P / E multiple of 35x in 2021, that translates to 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 27 times its 2021 EPS estimate of $ 0.40. While the 27x figure is on par with some of its peers, including Activision Blizzard
Mountain biking
and electronic arts
EA
, we believe Zynga deserves a higher P / E multiple given the strong revenue and earnings growth experienced in recent times, a trend that is also expected to continue.

Note: P / E multiples are based on the stock price at the end of the year and the reported (or expected) adjusted profit for the entire year.

While ZNGA stock may see higher levels, it’s helpful to see how its peers stack up. Check out the ATVI stock comparison to its peers to see how Activision Blizzard stacks up against its peers on important metrics. You may find other useful comparisons on peer-to-peer comparisons.

See everything Trefis price estimates and Download Trefis data here

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