Morgan Stanley Weighs in on Zynga Prior to Wednesday's Earnings Report

In the run up to Zynga's ZNGA CQ1 earnings report, scheduled this Wednesday, Morgan Stanley analyst John Egbert provided an overview of his 2014 expectations for Zynga. Egbert expects Zynga's bookings and user metrics to show signs of stabilization after having "likely bottomed out" last quarter, but points to FarmVille 2: Country Escape to be the "more interesting topic." Egbert believes there will be early signs of user growth in 2014 CQ1 and provided estimates of 32 MM /90 MM / 126 MM for DAU / MUU / MAU respectively. Additionally, he provided a bookings estimate of $145 MM and EBITDA of $7 MM, both of which fall below consensus. On a more optimistic note, Egbert looked to the early success of FarmVille 2 as a possible way for Zynga to generate material bookings, however; he stated this performance must hold for the long-term for bookings growth to materialize. To emphasize FarmVille 2's success, Egbert looked to App Annie which has FarmVille 2 rated as the fourth-most downloaded game for the iPhone platform and the second-most downloaded game for the iPad as of April 21. Egbert concluded, "Zynga's 2014E outlook was viewed favorably as it implies large sequential bookings increases from CQ2 through CQ4, but it will need to see growth from its core or new games(FV2CE?) quickly to get on track."