Zynga stock is down about 20% on Friday: here’s why

Zynga Inc. (NASDAQ: ZNGA) topped Wall Street estimates for profit and revenue in its fiscal second quarter. Shares of the videogame publisher, however, were down about 20% on Friday morning as investors focused more on the weaker than expected guidance.  

Financial performance

Zynga reported $27.8 million of net income in Q2 (2 cents per share) versus the year-ago figure of $150.3 million in loss (16 cents per share). It generated $720 million of revenue – a significant increase from last year’s $451.7 million, as bookings jumped more than 35% to $711.9 million.

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According to FactSet, experts had forecast $679.9 million of revenue, 2 cents of per-share loss, and $718.1 million of bookings.

Other notable figures and M&A spree

Other notable figures include an annualised growth of 87% in average mobile DAUs, a 51% in online gaming revenue, and an unprecedented 109% in built-in game ad revenue, which was attributed to Rolic that it acquired last year.  

Zynga is currently on an M&A spree, with Chartboost and StarLark being two of its most recent acquisitions. Additionally, Zynga is minimising its physical presence in San Francisco as it intends to adopt a hybrid workplace model.

Future guidance

For the fiscal third quarter, Zynga now forecasts $665 million of revenue and $660 million of bookings versus the FactSet consensus of $679.9 million in revenue and $718.1 million of bookings. Its full-year guidance for revenue matches analysts’ call, but bookings expectations are weaker by roughly $140 million.

CEO Gibeau’s remarks on CNBC’s “TechCheck”

Commenting on the weak guidance, CEO Frank Gibeau said on CNBC’s “TechCheck”:

“Starting in June and July as the great reopening began, as some of the players that had joined us in H1 of 2021 had an opportunity to go out, they started to play a little bit less. And at the same time, Apple rolled out its privacy changes to the advertising ecosystem, making us pull back on our marketing investments. While we are still on track to report record performance this year, these two issues are weighing on the short-term outlook.”