Zynga jumps 23% on promise of mobile transition

Analysts raise price targets after plans revealed to buy NaturalMotion, cut jobs

Financial trends and news by Steven Loeb
January 31, 2014
Short URL: http://vator.tv/n/34bc

Both analysts and investors are really digging Zynga's plan to buy up NaturalMotion and streamline its employee roster.

The company's shares rose 23.60% in regular trading on Friday, going up 84 cents to $4.40 a share.

At least five analysts either upgraded the stock or boosted their price targets, according to Analyst Ratings.Net.

“While Zynga's 4Q results and FY guidance beat our estimates, the company more importantly signaled investors to expect stabilization in bookings growth in 2014,” Evercore analyst Ken Sena said in a note, while boosting his price target from $4.00 to $4.50.

Telsey Advisory Group posted the largest price target, going from $4.00 to $6.00, while analysts at Janney Montgomery Scott upgraded shares of Zynga from a “sell” rating to a “neutral” rating.

Analysts and investors are reacting to two announcements from Zynga on Thursday.

The company announced that i would continue to push into mobile by buying NaturalMotion, a mobile game and technology developer, for approximately $527 million in cash and equity. It also said that be streamlining the business by cutting jobs. In all 314 employees, or approximately 15% of its current workforce, will be laid off. 

“As a result of these steps, we believe ZNGA has effectively bought itself some time to complete the transition to mobile and that the market will judge this positively,” Janney analyst Tony Wible said in a note.


Zynga came out ahead of expectations by reporting bookings of $147 million on a loss of three cents a share, beating out analyst expectations of $141 million on a loss of four cents.

It reported a net loss of $25 million for the quarter, which was down from a net loss of $49 million for the fourth quarter of 2012 and up from a net loss of $68,000 for the third quarter of 2013.

For the full year 2013, Zynga's bookings were $716 million, a decrease of 38% on a year-over-year basis.

Zynga, however, saw its numbers go down significantly from the same period last year, and the company is being forced to cut staff even further.

It's Monthly Unique Players were 1.3 million, less than half of the 2.9 million it was seeing a year ago. They were even down 16% quarter to quarter.

Daily active users (DAUs) dropped to 27 million in the fourth quarter of 2013 were 27 million, from 56 million in the fourth quarter of 2012. They were down 12% from 30 million in the third quarter of 2013. Monthly active users were also down, going from 298 million in Q4 2012 to 112 million in Q4 2013. They also went down 16% from 133 million in the third quarter of 2013.

Non-adjusted revenue for the quarter was $176 million, a decrease of 43% compared to the fourth quarter of 2012 and a decrease of 13% compared to the third quarter of 2013.

Online game revenue was $152 million, a decrease of 44% compared to the fourth quarter of 2012 and a decrease of 13% compared to the third quarter of 2013.

Advertising revenue was $24 million, a decrease of 35% compared to the fourth quarter of 2012 and a decrease of 15% compared to the third quarter of 2013. FarmVille 2Zynga Poker, andFarmVille accounted for 26%, 21% and 15% of online game revenue, respectively, for the fourth quarter of 2013 compared to 22%, 19% and 18%, respectively, for the third quarter of 2013.

Zynga is projecting revenue for Q1 2014 to be in the range of $1575 million to $165 million, with a projected net loss of between $56 and $49 million.

Non-GAAP loss per share is projected to $0.01, based on a share count of approximately 860 million shares.

(Image source: http://mashable.com)

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Description: Zynga is the largest social gaming company with 8.5 million daily users and 45 million monthly users.  Zynga’s games are avail...