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TheStreet Open House

Four Earnings Reports That Will Help Shape Market Direction (Correct)

Stocks in this article: ZNGAOCZMOSMONFBYHOO

ZNGA Chart ZNGA data by YCharts

Zynga (ZNGA)

Background: Zynga is the world's largest social game developer. Games include CityVille, FarmVille and many others on which I receive daily requests to join in. Zynga games are available on a number of global platforms including Facebook (FB), MySpace, Yahoo! (YHOO), the iPad, the iPhone and Android devices. Zynga trades an average of 18 million shares per day with a market cap of $2 billion.

52-Week Range: $2.66 to $15.91

Price To Book: 1.11

Wall Street isn't expecting much this quarter (not a surprise for one of the worst performers this year). The third-quarter earnings release is scheduled for sometime this month. The consensus estimate is currently a loss of 6 cents a share, and there isn't a corresponding period last year.

Last quarter ZNGA's earnings were released on July 25, and the previous closing price was $5.08. Relative to a current price of $2.84, shares are down 44.1%.

Fifteen out of 20 analysts rate Zynga a hold. Only four recommend a buy and one recommends selling. The average analyst target price is $4.89.

From a technical perspective, the chart for Zynga looks like an Aspen ski slope with the top of the hill on the left side. Over the last month in trading the stock has dropped about 8.4%.

Zynga has an awful looking chart, an upcoming report expected to post a loss, and a dependency on Facebook that makes meth addicts appear stable and in control. Still, there is something very wrong with this picture. Not all the dots connect, and maybe it's a result of a lack of long-term history. However, Zenga has found technical support.

It's almost too obvious Zynga will continue to fall other than the short interest is rather small. The short interest based on the float is only 4.4%. Zynga may not beat in the upcoming report so focus on the guidance and ignore the previous results. If they don't guide into the abyss, consider the earnings a strong indication shares will trend higher. A price under $3 a share will likely appear as a bargain price.

Also, keep an eye on the options. Options are pricing in a large move the odds favor a move higher. ZNGA Revenue Chart ZNGA Revenue data by YCharts

I use Zacks.com, WSJ.com, Tradestation and Reuters for my data. PE is generally adjusted PE based on an average number of shares.

At the time of publication the author did not hold a position in any stock mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

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