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Outlook for 2012 remains the same, making shares too expensive for Wall Street liking
Shares of Zynga were slammed 15% to $12.27 Wednesday morning, after the popular social gaming company gave analysts little optimism about its outlook for this year.
Zynga, which is responsible for such popular online games as Farmville, Citiville, and Petville,announced late Tuesday its first quarterly earnings report since going public last December, soundly beating analyst expectations.
Zynga earned a Q4 operating profit of 5 cents a share, with revenue up 59% from a year ago to $311.2 million. Leading into Tuesday's announcement, Zynga was expected to post profits of 3 cents per share, with revenue of $301.2 million, according to analyst John Butters of Factset.
Zynga shares had risen 7.61% to $14.44 per share on Tuesday, before the release.
The company reported a big $435 million loss in Q4 net income, though analysts were expecting this, as its public offering cost the company in restricted employee shares.
2011 saw full-year bookings of $1.16 billion for Synga, up 38%, and revenue of $1.14 billion, up 91% year-over-year. Zynga's projections for 2012 were for bookings to be in the range of $1.35 billion to $1.45 billion. The company indicated that growth would be weighted towards the back-half of the year with slower sequential growth in the first half of the year.
Zynga is a high profile tech company, in no small part because of their close partnership with Facebook. The gaming company accounts for about 12% of the social network's revenue, and since Facebook's $5 billion IPO, Zynga has experienced a Facebook "halo effect," witht the gaming company's stock showing much stronger traction than it had enjoyed since its own IPO.
Directly after going public, Zynga shares plummeted well below its already conservative $10 per share offering, hitting as low as $8 in January. But that has changed in the last few weeks, with shares growing 27% in the first two weeks of February.
Still in spite of recent growth, Wall Street analysts were mixed this morning before the announcement, as to how to proceed with trading. Five of the ten analysts following the company rated the stock as Buy or better, with four rating it a Hold, and one a Sell.
"CityVille, Zynga Poker, Farmville, and Words With Friends are among the top apps, according to AppData," said Doug Anmuth of JP Morgan. "Zynga maintains 6 of the top 7 game apps with EA's Sims Social being the only non-Zynga title. In Oct 2011, AppData altered its methodology for counting MAUs so 4Q comparisons to prior quarters are less meaningful."
BTIG Research sees potential for Zynga's growth in 2012, due to expansion into new game genres.
"Zynga appears to be eyeing an array of other verticals including Sports and Physics (think Angry Birds with its pull to launch “physics,” with Zynga leveraging its recent ZombieSmash acquisition), in addition to looking at the Cooking category as a potential way to expand its 'Ville' franchise," said analyst Richard Greenfield in his report.
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Zynga is the largest social gaming company with 8.5 million daily users and 45 million monthly users. Zynga’s games are available on Facebook, MySpace, Bebo, Hi5, Friendster, Yahoo! and the iPhone, and include Texas Hold’Em Poker, Mafia Wars, YoVille, Vampires, Street Racing, Scramble and Word Twist. The company is funded by Kleiner Perkins Caufield & Byers, IVP, Union Square Ventures, Foundry Group, Avalon Ventures, Pilot Group, Reid Hoffman and Peter Thiel. Zynga is headquartered at the Chip Factory in San Francisco. For more information, please visit www.zynga.com.