Investors sent shares of Zynga Inc (NASDAQ:ZNGA) higher after the close yesterday, following fourth-quarter results that weren’t as bad as many analysts had initially feared. The social-gaming company eked out a profit of $0.01 a share, on flat revenue of $311.2 million, which was unchanged from the year-ago period. Meanwhile, the Street was expecting a loss of $0.03 a share and sales of $250.2 million for the quarter.
Low expectations are a good plan
The earnings results are an example of strict cost-cutting and layoffs at the company. Before yesterday’s surge in the stock price, shares of Zynga had lost a humiliating 73% of their value since the company’s IPO at the end of 2011. Of course, the company’s fall from grace was more than warranted.
In 2012, Zynga also suffered a high-profile blow when gaming heavyweight Electronic Arts Inc. (NASDAQ:EA) took the company to copyright court for allegedly ripping off its popular games The Sims and The Sims Social on Facebook. However, it’s a new year and perhaps a new start for the embattled company. So where does Zynga go from here?
Betting it all
Zynga’s free-to-play model means that the company makes money through the sale of ads and virtual goods within its games. Fortunately (or Zynga, bookings for the most recent quarter were encouraging at $261.3 million, whereas analysts were looking for $222.4 million, according to Bloomberg. This is an important metric, because bookings denote the total sales of virtual goods sold in the period.
Another curious development from the quarterly results is that about a quarter of Zynga’s 298 million monthly active users now access its games from mobile devices. At 72 million monthly active mobile users, the company says it has the largest daily audience in mobile gaming, according to a note from Tech Crunch. Good work, Zynga — you’re not going out of business tomorrow.
While this is certainly a step in the right direction, Zynga still faces an uphill battle in the year ahead as it tries to turn the business around. The company is putting a lot of resources into its upcoming real-money gambling initiative with Bwin.party, which is on track to launch in the U.K. this year.
According to AllThingsD, Zynga has confirmed that the real-money casino-style games will be available across various platforms, including the Web, PC download, Facebook, and possibly mobile as well. If its partnership with Bwin.party pays off, it would mean a new, not to mention much-needed, revenue channel for Zynga.
I truly wish I could see the light at the end of the tunnel for Zynga. Unfortunately, new gaming initiatives and upbeat trends in its mobile business aren’t enough for me to justify investing in what is clearly damaged goods.
The article Zynga: Don’t Call It a Comeback originally appeared on Fool.com and is written by Tamara Rutter.
Fool contributor Tamara Rutter owns no shares of any company mentioned in this column. The Motley Fool recommends and owns shares of Facebook.
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