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 Inc (NASDAQ:ZNGA) were down more than 16% as of 1 p.m. Friday after the company announced weaker-than-expected fourth-quarter results.
So what: Quarterly revenue climbed 9.2% year over year to $192.5 million, which resulted in an adjusted net loss of roughly $2.5 million, or closer to $0.00 per share. Bookings -- which are Zynga's key measure for in-game virtual goods purchases -- grew 24% year over year to $182.4 million, including a 120% increase in mobile bookings over the year-ago period. Unfortunately, analysts were looking for a roughly break-even quarter on higher sales of $201.1 million.
In addition, Zynga expects current-quarter revenue in the range of $155 million-$165 million, while bookings are projected to be $140 million-$150 million. That should result in an adjusted net loss per share in the range of $0.03-$0.02. Wall Street, for its part, was modeling another break-even quarter on significantly higher revenue of $200.9 million.
Zynga also announced the closure of its Zynga China studio, which will affect 71 employees and result in annualized cost savings of around $7 million.
Now what: Mobile bookings represented 60% of Zynga's total in Q4, thanks to an 87% increase in monthly mobile consumers over the year-ago period. It makes sense, then, that Zynga is hitting mobile hard, with CEO Don Mattrick stating, "We will deliver a 100 percent mobile-first new product slate featuring new games, with a goal of ending 2015 with more than 75% of our fourth quarter bookings coming from mobile."
Even so, that's little consolation for investors if the company can't achieve sustained profitability in the process. And while a couple of big hits could certainly right Zynga's ship, I'm personally still skeptical of the difficult economics behind the free-to-play game industry. As a result, it's hard to blame the market for bidding down Zynga stock Friday.
Steve Symington has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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.