Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Zynga (ZNGA -2.04%) are down about 7% today, after losing more than 10% in early trading. The market is not satisfied with Zynga's second-quarter guidance, in spite of a surprising earnings beat yesterday.
So what: Zynga's first-quarter earnings came in with a profit of $0.01 per share, ahead of not only Wall Street's $0.04 loss-per-share consensus, but Zynga's own guidance, as well. However, revenue of $263.6 million was below the $264.8 million analyst consensus, and it also represented an 18% year-over-year decline, which is pretty bad no matter which way you slice it. Zynga's second-quarter guidance of between $225 million and $235 million in revenue, and a loss of $0.04 to $0.03 per share is below expectations -- Wall Street sought a loss of $0.01 per share, and $261.7 million in revenue.
Now what: What else is wrong? Daily active users are way down year over year, from 65 million, to 52 million (a 21% decline), and down 8% sequentially, from 56 million in the fourth quarter. Monthly unique users also posted double-digit declines of 13% year over year, and 15% sequentially, arriving at a figure of 150 million for the first quarter. Company executives recognize that this is a "transition" year, but investors can't hang around on hopes and promises -- Zynga needs to show real results to justify real gains.