Zynga's First IPO Report Above Market Estimates

Yesterday, Zynga released their fourth quarter and 2011 full year financial report. The company states that during the fourth quarter, their non-GPAA EPS was 5¢ higher than predicted by market analysts. When Zynga first went public with their IPO, Gaming Bus reported that analyst group Sterne Agee classified the stock as Underperform. However, Zynga has done anything but that in their financial report.

 

The full year for 2011 recorded bookings of $1.16 billion, which is up 38% year-over-year; and revenue was $1.14 billion, which is up 91% year-over-year. Meanwhile, the net income based on GAAP saw a loss of $404.3 million. The reason for this loss is based on the stock units that employees have with the company.

Zynga’s fourth quarter recorded bookings of $306.5 million, which is up by 26% year-over-year and up 7% from their third quarter report. The company saw online game revenue increase to $283.9 million, or 51%, compared to the fourth quarter in 2010. The advertising revenue also increased to $27.3 million or 230% compared to the fourth quarter of 2010. Zynga has also seen a growth with their user base, which is at 153 million unique users currently for the fourth quarter.


Analysis: I said before that we should be cautiously optimistic about Zynga, and that still holds true in light of this. The company just went public, and beating market predictions could just be because others want a slice of the Zynga pie, however small, as it wasn’t that much above market predictions. I’m a little surprised by it nonetheless: many were betting against them, myself included, but it never felt right to say they were going to fail.

This is the time where everyone needs to be more mindful of Zynga’s future if you plan to invest with them. The reason for this is because Gaming Bus reported just yesterday that Zynga has just had a lawsuit filed against them for patent infringement, and as Nathan pointed out in his analysis, this kind of lawsuit is common in the industry. How many more of these will come about now that Zynga is public? Again, this is a wait-and-see situation, but I suspect it will be based on the success or failure of this lawsuit or with how much higher their stocks rise.

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