Zynga Inc. Earnings: Game Over or New Life?

Zynga continues to see sales plunge, but is the bleeding finally ending?

Apr 21, 2014 at 12:05PM

On Wednesday, Zynga (NASDAQ:ZNGA) will release its quarterly report, and investors are finally starting to see a light at the end of the tunnel for the much-criticized social-gaming giant. King Digital Entertainment (NYSE:KING) erupted onto the scene with its Candy Crush Saga-inspired IPO, but Zynga has still been working to figure out its strategy without Facebook (NASDAQ:FB) in its corner.

Zynga has fallen from grace since its own late-2011 initial public offering, with interest in the company's social games having hit a ceiling and given way to new offerings from King Digital Entertainment and other competitors. Yet even after seeing its shares plunge over the past few years, many investors now believe that Zynga can mount a credible comeback strategy. Will Zynga's strategic moves pay off? Let's take an early look at what's been happening with Zynga over the past quarter and what we're likely to see in its report.

Znga
Source: Zynga.

Stats on Zynga

Analyst EPS Estimate

($0.01)

Year-Ago EPS

$0.01

Revenue Estimate

$147.52 million

Change From Year-Ago Revenue

(36%)

Earnings Beats in Past 4 Quarters

4

Source: Yahoo! Finance.

Can Zynga earnings get back into the black?
In recent months analysts have raised their views on Zynga earnings, trimming first-quarter loss estimates by half and reversing initial calls for losses in 2014 and 2015 to modest gains. The stock has managed to climb by 6% since mid-January.

Zynga came into 2014 on a high note, as its fourth-quarter results were much better than investors had expected. That might come as a shock given Zynga's 43% drop in revenue from the year-ago quarter, but expectations were incredibly low for the company, and guidance for revenue to come in 5% to 12% higher in the first quarter than analysts had projected also bolstered confidence.

Moreover, investors celebrated the acquisition of NaturalMotion, a mobile-game developer that could help improve Zynga's penetration in the mobile realm. Zynga paid more than $525 million for the company, with the hopes that it will prove to be a better buy than its OMGPOP acquisition two years ago. Given the need for Zynga to be less dependent on Facebook and move toward its own mobile platform, Zynga's acquisition is consistent with its longer-term strategy.

Zynga's most important task, though, is to recapture some of its lost customers. Redesigning of games to make them more mobile-friendly is a big part of Zynga's strategy to fight back against King Digital Entertainment and regain supremacy in the industry. Zynga launched FarmVille 2: Country Escape last week directly to mobile-device users, no longer relying on Facebook and demonstrating its potential independence despite also offering compatibility to Facebook users.

On a positive note, Zynga has inspired well-known investor George Soros with its strategic moves, as Soros Fund Management announced a new position in Zynga as of Dec. 31. The position that Soros took is extremely small compared to his overall holdings, but it nevertheless represents implicit support for the path that Zynga is taking toward a recovery.

In the Zynga earnings report, watch for further signs of forward progress on its evolution toward mobile reliance. With mobile gaming seeming like the clear direction of the overall market, Zynga needs to execute on its strategy if it doesn't want to squander yet another chance at recapturing its past glory.

Bigger than mobile gaming, this is the biggest thing to come out of Silicon Valley in years
If you thought the iPod, the iPhone, and the iPad were amazing, just wait until you see this. One hundred top engineers are busy building one in a secret lab. And an ABI Research report predicts 485 million of them could be sold over the next decade. But you can invest in it right now. Click here to get the full story in this eye-opening new report.

Click here to add Zynga to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Facebook. The Motley Fool owns shares of Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers