Zynga Delivers A Tad Ahead… Is It Good Enough? (ZNGA)

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Zynga, Inc. (NASDAQ: ZNGA) has reported its first corporate earnings report since coming public this year.  The social gaming company has reported earnings of $0.06 EPS and $329 million in revenue.  Thomson Reuters had estimates of $0.05 EPS on $317.25 million in revenue.  On a GAAP basis including the IPO costs Zynga would have lost on earnings at -$0.12 EPS.

The guidance for 2012 is as follows: Bookings are projected to be in the range of $1.425 billion to $1.5 billion, with most growth weighted in the second half.  Full year 2012 non-GAAP EPS of $0.23 to $0.29.  Thomson Reuters has revenue projections of $1.42 billion and non-GAAP earnings of $0.27 EPS.

The company talked up its record bookings at $329 million for a 15% gain.  New game development drove down its EBITDA by 23% to $87 million on an adjusted basis. Daily active users have risen from 62 million in the first quarter  of 2011 to 65 million in the first quarter of 2012, for a gain of 6%.  Monthly active users have risen from 236 million in the first quarter of 2011 up to 292 million in the first quarter of 2012, for a gain of 24%.

We were not sure how Zynga would offer up guidance, but here is what the company offered up as additional 2012 outlook figures beyond the above guidance:

  • Adjusted EBITDA of $400 million to $450 million.
  • Cap-ex of $390 million to $410 million, including its headquarters purchase.
  • Effective non-GAAP tax rate of 25% to 30%.
  • Non-GAAP weighted-average diluted shares outstanding of about 880 million shares in the fourth quarter of 2012.

Zynga closed up 3.4% at $9.42 and the stock is up 1.6% at $9.57 in the after-hours session reaction.  Zynga is still trading as a busted IPO in the classic sense of the term.  Today’s numbers are not exactly blowout figures and the guidance seems mostly in-line with estimates for the year.  We also have a hard time trusting that the increases will be back-end loaded considering that the company has no history to refer back to as a trust factor.

This may be good enough for some investors but this is not a screaming buy as far as we can see without hearing the conference call as of yet.

JON C. OGG

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