Is Zynga Inc (NASDAQ:ZNGA) The Best Gaming Stock RightNow?

Is Zynga Inc (NASDAQ:ZNGA) The Best Gaming Stock RightNow?


Mobile game developer Zynga Inc (NASDAQ:ZNGA) has been one of the leaders in its industry for quite some time, and earlier this month, the company declared its financial results for the fiscal first quarter. The performance was mixed.

Earnings Recap

On the revenues front, the company managed to top management’s as well as analysts’ estimates and posted $404 million. However, the net losses for Zynga stood at $0.11 per share for the period, which is significantly more than the projections of $0.03 from the company. Analysts had expected net loss per share of $0.01 per share. The stock declined on Thursday, but perhaps it is also necessary for investors to bear in mind that things might not be as bad as many think.

Zynga has delivered solid growth in recent times. In the first quarter, the company’s sales grew by as much as 52% year on year, and total bookings rose by 18% to hit $425 million. The quantum of revenue growth in the United States was 41%, while the same in the international markets stood at 72%. However, Zynga had to pay bonuses for the better than expected performance of games created by Garth Games and Small Giant Games, two studios it had acquired two years ago.

These bonus payments had been the primary reason behind the higher than expected losses. The operating cash flow stood at $35 million, and as of March 31, the company had cash as well as investments worth $1.43 billion. In addition to the wider than expected losses, the daily active users slumped 21% year on year to 21 million. In addition to that, Zynga also experienced a 5% decline in monthly active users, which dropped to 68 million. While it is true that the company has monetized its games well, the decline in MAU and DAU must be a cause for worry.

Earlier on in the year, Zynga had projected it was going to generate annual revenues of $1.6 billion and bookings to the tune of $1.75 billion. Sign up below to follow critical updates on Zynga and other breakout stocks.