Zynga Founder Steps Down: Good or Bad Sign?

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Source: https://play.google.com/store/apps/details?id=com.zynga.FarmVille2CountryEscape

Solid mobile growth and cost control drive upside. Bookings were $161 million versus our estimate of $150 million, consensus of $148 million, and guidance of $138 – 148 million. Mobile accounted for 36 percent of bookings. Non-GAAP EPS was $(0.01) versus our estimate of $0.00, consensus of $(0.01), and guidance of $(0.01). EPS benefitted from restructuring and a data center closure. Audience metrics, bookings, and adjusted EBITDA all grew quarter-over-quarter one quarter faster than anticipated.

Q2 bookings guidance exceeded our expectations. Q2:14 guidance is for bookings of $175 – 195 million, adjusted EBITDA of $10 – 20 million, and non-GAAP EPS of $0.00 – 0.01. We had previously expected bookings of $185 million and guidance of $170 – 180 million. The strong Q2 bookings guidance likely reflects confidence from positive traction for Zynga’s (NASDAQ:ZNGA) March mobile re-launches of Zynga Poker and Words With Friends, and for its initial mobile launch of FarmVille 2: Country Escape, which has over 4 million installs in under a week.

At the high end of Q2 bookings guidance, Zynga needs sequential growth of only around $20 million per quarter to hit the high end of FY:14 guidance. We estimate that the addressable market for Zynga games will grow by $4 billion this year to $16 billion, suggesting that the company can achieve its guidance without any high profile game releases. We expect 1 – 2 new games to launch later this year, and believe the release schedule could include as many as 4 new games, giving us confidence that Zynga can meet or exceed guidance.

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