Zynga Beats the Street But Earnings Slow
The social gaming giant beat Wall Street expectations with its first ever earnings report as a public company. Zynga earned 5 cents per share, on a non-GAAP basis, two cents more than Wall Street expected.
And revenue, or "bookings," came in at $306.5 million. The company’s growth metrics also look good: monthly unique users increased more than expected from 111 million a year ago to 153 million, with daily active users also growing more than expected, up 13 percent to 54 million.
As soon as the earnings hit the wire the stock took a dip, then recovered.
Why the drop?
The company’s earnings per share declined from 9 cents a year ago to 5 cents this past quarter.
And the company warned of “slower sequential growth in the first half of the year.” Also, the company’s "bookings," or revenue projections for the year, are a bit lower than expectations. The mid-point of the projection range is $1.4 billion for the year, and analysts were looking for $1.42 billion. But the company’s non-GAAP EPS projections of 24 to 28 cents solidly bests the 22 cents analysts expected.
The big question is how Zynga will diversify away from its reliance on Facebook, and just a handful of games and a small percentage of its payers. The company upped what it calls “monthly unique payers” 13 percent from the third to fourth quarter, to 2.9 million.
CEO Mark Pincus indicates that the company is becoming less reliant on Facebook by pointing out that it has seen strong mobile games growth in the past quarter, and three of its games were in the top 10 grossing games on Apple’s iOS platform last quarter.
On the earnings call we’re certain to hear a number of questions about plans to expand Zynga’s stand-alone gaming platform — an alternative to playing on Facebook. And with Rovio launching its "Angry Birds" game on Facebook, we’ll see if Pincus says anything about growing competition.
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