What to Look For in Zynga's Earnings Tomorrow

Last quarter, it would have behooved you to dump Zynga (Nasdaq: ZNGA  ) before Valentine's Day.

Investors had wined and dined Zynga leading up to the release, hoping that the company would put out some lusty earnings on that romantic day. Alas, they quickly sobered up the morning after, when the social gamer woke them up with an 18% loss. A walk of shame, indeed.

ZNGA Chart

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The run-up happened in part because Zynga's main flame, Facebook, flashed its private parts to the world a few weeks prior, disclosing that Zynga was responsible for 12% of the social networker's revenue last year. More recently, Facebook disclosed its first-quarter earnings, with 11% of sales coming directly from Zynga and another 4% indirectly. While Zynga is mostly monogamous with Facebook -- 94% of revenue was attributed to its platform last quarter -- Facebook certainly makes eyes with other partners.

Can this quarter turn the tide for Zynga?

Analysts are looking for revenue of $317.7 million, with earnings per share of $0.05. I'll have my eye on Zynga's bookings figures, as an important precursor for Zynga's revenue pipeline that has been drying up recently. If bookings growth continues to decelerate, or even turn negative, that spells trouble for Zynga's future prospects.

Another important dynamic to keep an eye on is how much of revenue came from Facebook in the quarter, although this might wait until Zynga files its 10-Q (typically shortly after the press release). The company has been making big pushes into mobile platforms like Apple (Nasdaq: AAPL  ) iOS and Google (Nasdaq: GOOG  ) Android.

It's shown a propensity to snap up any mobile app developer that can climb the charts on those platforms, so Zynga's reliance on Facebook should eventually begin ticking down. It picked up OMGPOP shortly after Draw Something temporarily grabbed the No. 1 iOS and Android paid app spot. I find that acquisition rather questionable, though, so I'm curious how much goodwill that deal generated, since I think Zynga overpaid. Zynga's also made it pretty clear that it plans on continuing its acquisitive ways.

Zynga's own platform is a more promising and organic way to diversify its revenue base (if it ditches Facebook Credits), but that will take more time. It already has a start with three developers onboard, notably including iconic game maker Konami (NYSE: KNM  ) .

Zynga shareholders should buckle up for earnings tomorrow after the close.

Zynga is a Faker Breaker, which doesn't bode well for its chance of delivering multibagger returns. That's something that Rule Breakers excel at, so Discover the Next Rule-Breaking Multibagger by checking out this special free report. It's free.

Fool contributor Evan Niu owns shares of Apple, but he holds no other position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Google and Apple. Motley Fool newsletter services have recommended buying shares of Google and Apple and creating a bull call spread position in Apple. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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