Zynga shares shoot up 9.5% after topping Q4 goals

Analysts still cautious that the social gaming giant won't be able to produce 'profitable' hits

After a tumultuous year that saw Zynga lose its relationship with Facebook, as well as many of its high ranking employees, the social game developer seemed like a goner.

But Zynga is showing its resilient side, as its latest quarterly report beat Wall Street expecations, sending shares up almost 10% in early trading to nearly $3.

Still that price is hardly satisfactory to the many investors who bought the stock last year around this time, when Zynga traded at $12.

To this end, given its performance last year, some analysts remain cautious on Zynga's ability to create successful games going forward. 

"Zynga faces a number of headwinds over the next few quarters – some are structural, some more execution-based," said JP Morgan analyst Doug Anmuth, in a research report to investors.

"We think new titles are witnessing good early growth, but unlikely to offset declines in older games. In addition, mobile monetization appears to be well below web monetization levels making it difficult for Zynga to offset lost game usage from Facebook. We view continued share repurchases and the bwin.party partnership as positive catalysts." 

While Zynga is more focused than it was six months ago, it's too soon to call it a turnaround story, suggested Anmuth, who has a "neutral" rating on the stock.   

Anmuth raised his estimates on Zynga's first quarter 2013 revenue to $209.4 million from $187.1 million and Zynga's full year 2013 revenue to $900.5 million from $841.3 million. 

Anmuth's estimates are far more optimistic than Zynga's. Zynga expects to lose between $12 million to $32 million on revenue that could be between $255 million and $265 million in the quarter. Bookings are projected to be between $200 and $210 million.

Stern Agree analyst Arvind Bhatia also raised his estimates for the company's full year revenue in 2013 from $855 million to $905 million. 2014 estimates went from $898 million to $950 million.

Bhatia was also neutral on the stock, noting that Zynga still had to prove it could create hit games after losing its favored status on Facebook.

"Mgmt's focus on preserving/growing free cash flow should help limit downside to the stock. However, for any sustainable appreciation in the stock, we think the company needs to prove it can still create hits profitably especially after its favored status on the FB platform dissipates," Bhatia wrote. 

Zynga's fourth quarter numbers

In its fourth quarter results, Zynga reported GAAP revenue of $311 million, flat year-over-year, with bookings of $261 million, down 15% year-to-year. Earnings per share came in down 6 cents, while adjusted earnings per share was a penny.

Analysts had been expecting to see a loss of 3 cents per share on revenue of $212 million. 

Zynga narrowed its losses to $48 million in the fourth quarter, down 89% from $435 million in the year-ago period.

Full year revenue for the company was $1.28 billion, up 12% year-over-year, and bookings of $1.15 billion, down 1% year-to-year. 

Zynga's daily active users increased 3% year-to-year, from 54 million to 56 million. DAUs were down 6% from 60 million in the third quarter.

Monthly active users were up 24% year-to-year, from 240 million to 298 million. Once again, though, they were down 4% quarter-to-quarter, from 311 million.

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