Zynga: Don’t Miss the Opportunity

Zynga (ZNGA) announced fourth quarter ended December 31, 2015 total revenue of $182.1 million, slightly below $182.4 million during the same period last year. The company has also provided revenue guidance for first quarter of fiscal 2016 and estimates revenue in the range of $160 million to $175 million.

Getting better

Zynga declared fourth quarter of 2015 non-GAAP net income of $0.4 million, compared to non-GAAP net loss of $2.5 million in the fourth quarter of 2014 and non-GAAP net income of $3.7 million in third quarter of 2015.
Moving ahead, Zynga expects first quarter of 2016 net loss to be in the range of ($40) million to ($30) million or ($0.05) to ($0.03) per share.

The mobile platform game development company reported a slight year-over-year fall in its top line and healthy bottom line expansion primarily driven by somewhat 13% lowering of the expenditures over last year.

Zynga witnessed year-over-year reduction both in its top and bottom lines mainly due to the bookings for the quarter remaining almost flat while smaller reduction in the company’s overall expenses.

The international game development and marketing company illustrated a significant 21% year-over-year increase in mobile bookings with 82% of net mobile Daily Active Users (DAUs) recorded during the quarter. During the fourth quarter of 2015, Zynga declared total bookings of $182 million, up 3% sequentially from third quarter of 2015 and remaining flat over the fourth quarter of 2014. In addition, Zynga estimates first quarter of 2016 bookings to be in $150 million to $165 million range.

Zynga has failed to grow its year-over-year bookings for the quarter and only slightly improved on its sequential earnings growth which can be considered as a major cost-cutting action being performed by the company and is projected to position it strongly for sustainable long-term growth by notably improving the cash flows over the longer term.

New IPs will drive growth  

The key mobile devices game developer has continued to strategically grow its percentage of mobile bookings while simultaneously continuing to minimize the quarter-over-quarter percentage of web bookings. This strategic shift towards growth in mobile bookings is in line with the expanding global acceptance of mobile devices which is believed to continue over the long-term and thus, continue to benefit the mobile game development company. The social casino product comprises of the recent launch of Black Diamond Casino and Princess Bride Slots which are believed to be in the upper 30, topping the casino charts in the App store for Apple. Going forward into 2016, the company estimates key bookings expansion for the unique Slots franchise to be mainly allowed by its innovative titles. Zynga targets on introducing 4 fresh games during the beginning of this fiscal year that includes, Vegas Diamond Slots, True Vegas, Willy Wonka Slots and Spin It Rich! Further, Zynga strategically acquired Zindagi Games and focused on introducing 2 Match?3 games during the first quarter.

Moving ahead, Zynga is keenly focused on introducing CSR2 and Dawn of Titans during 2016 with both these innovative games already holding average Apple App Store rating of 4.6 stars and 4.4 stars respectively. Also, the game company is focused on bringing CityVille Mobile to key global customers by the end of fiscal 2016 along with the unique introduction of a creative sequel of FarmVille 2: Country Escape during the period.

The rapid launches of new games for mobile platform by Zynga signifies the rising customer traction for playing innovative games on their mobile devices which is expected to continue over the longer term and thus, continue to benefit the key game development and marketing company.


Overall, the investors are advised to “Hold” their position in Zynga, Inc. considering the company’s significant long-term growth prospects being notably supported by its solid financial position with healthy total cash of $987.25 million with no debt. The PEG ratio of 3.63 indicates impressive company growth and much better than the industry’s growth average of 0.96. However, the profit margin of -15.89% seems misguiding and depicts no profit but loss.
Published on Apr 1, 2016
By Vinay Singh

Copyrighted 2020. Content published with author's permission.

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