Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Zynga Inc (ZNGA): Don’t Call It a Comeback

Page 1 of 2

Investors sent shares of Zynga Inc (NASDAQ:ZNGA) higher after the close yesterday, following fourth-quarter results that weren’t as bad as many analysts had initially feared. The social-gaming company eked out a profit of $0.01 a share, on flat revenue of $311.2 million, which was unchanged from the year-ago period. Meanwhile, the Street was expecting a loss of $0.03 a share and sales of $250.2 million for the quarter.

Low expectations are a good plan
The earnings results are an example of strict cost-cutting and layoffs at the company. Before yesterday’s surge in the stock price, shares of Zynga had lost a humiliating 73% of their value since the company’s IPO at the end of 2011. Of course, the company’s fall from grace was more than warranted.

Zynga Inc (NASDAQ:ZNGA)Zynga struggled right out of the gate as a result of its dependence on Facebook Inc (NASDAQ:FB) for players. In fact, at one point Facebook accounted for more than 90% of Zynga’s bookings and revenue.

In 2012, Zynga also suffered a high-profile blow when gaming heavyweight Electronic Arts Inc. (NASDAQ:EA) took the company to copyright court for allegedly ripping off its popular games The Sims and The Sims Social on Facebook. However, it’s a new year and perhaps a new start for the embattled company. So where does Zynga go from here?

Betting it all
Zynga’s free-to-play model means that the company makes money through the sale of ads and virtual goods within its games. Fortunately (or Zynga, bookings for the most recent quarter were encouraging at $261.3 million, whereas analysts were looking for $222.4 million, according to Bloomberg. This is an important metric, because bookings denote the total sales of virtual goods sold in the period.

Another curious development from the quarterly results is that about a quarter of Zynga’s 298 million monthly active users now access its games from mobile devices. At 72 million monthly active mobile users, the company says it has the largest daily audience in mobile gaming, according to a note from Tech Crunch. Good work, Zynga — you’re not going out of business tomorrow.

While this is certainly a step in the right direction, Zynga still faces an uphill battle in the year ahead as it tries to turn the business around. The company is putting a lot of resources into its upcoming real-money gambling initiative with Bwin.party, which is on track to launch in the U.K. this year.

Page 1 of 2
Loading...