Zynga Q2 earnings preview: What’s in the cards?

After reaching a 7-year high on June 6, Zynga (NASDAQ: ZNGA) is set to report its second-quarter 2019 financial results on July 31, Wednesday after the market close. The market expects the online mobile games company’s revenue to grow 56% year-over-year to $364.48 million for the quarter ended June 30, 2019. Shares of Zynga ended up 1.41% at $6.46 when the market closed Friday.

The Farmville-maker had projected Q2 revenue to grow 29% year-over-year to $280 million and bookings to surge 54% to $360 million. Net loss has been predicted to be $70 million or $0.07 per share.

Like the first quarter, Q2 topline performance is estimated to be driven by mobile live services, anchored by the company’s five forever franchises (CSR Racing, Empires & Puzzles, Merge Dragons!, Words With Friends and Zynga Poker). Growth in bookings is expected to be primarily driven by full quarter contributions from Small Giant Games and Gram Games as well as strength in Words With Friends and CSR2.

When Zynga reported first-quarter results, it hiked the 2019 revenue outlook to $1.2 billion from the prior estimate of $1.15 billion and bookings guidance to $1.45 billion from the prior projection of $1.35 billion. The company sees low double-digit revenue and bookings growth in 2020 as the live service growth in 2020 will be further enhanced by the full contribution from the new game launches in 2019.

At the end of May, Zynga launched Game of Thrones Slots Casino globally on the App Store and Google Play. Early June, the company launched the Tiny Royale game, exclusively on Snap Inc’s (NYSE: SNAP) new real-time multiplayer gaming platform, Snap Games.

In the recently ended quarter, Zynga entered into sale and leaseback agreements with Beacon Capital Partners for its San Francisco headquarters building. Zynga will leaseback space within the building and remain headquartered in San Francisco. As a result, Zynga expects to receive a net cash benefit of approximately $600 million in 2019.

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For the first three months ended March 30, 2019, the San Francisco-based company’s revenue grew 27% annually to $265 million and bookings surged 64% to $359 million with a net loss of $129 million or $0.14 per share. The company had the best mobile revenue and bookings performance in its history with mobile revenue of $246 million, up 35% year-over-year, and mobile bookings of $341 million, up 77% year-over-year.

Mobile accounted for 93% of total revenue and 95% of total bookings in Q1. The company’s bottom line and top line fell short of market’s expectations, However, the raise in 2019 outlook sent Zynga shares in the upward direction.

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In Q1, the company’s average mobile daily active users (DAUs) declined by 2% and average mobile monthly active users (MAUs) declined by 12% year-over-year.

ZNGA stock, which reached a new 52-week high ($6.55) in early June, had rallied 64% since the beginning of this year and 53% from the year-earlier level.

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