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Zynga Stock Rises despite Earnings Miss


Jun. 27 2019, Updated 4:51 p.m. ET

Zynga stock up by 5.6%

The stock of gaming company Zynga (ZNGA) rose 5.6% on May 2 to close trading at $5.82. The stock is currently trading 75% above its 52-week low of $3.32 and 7% below its 52-week high of $6.28.

Zynga announced its first-quarter results on May 1 and reported revenue of $265.4 million, a rise of 27% YoY. Non-GAAP (generally accepted accounting principles) EPS fell YoY to -$0.07 in the first quarter from $0.04 in the prior-year period.

Analysts expected Zynga to post sales of $328.48 million with EPS of $0.05 in the first quarter. So why did the stock rise despite the significant earnings and revenue miss?

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Strong growth in bookings

Zynga’s reported bookings more than doubled to $359 million in the first quarter, up from $162 million. Bookings is a metric that reflects future business agreements. Zynga also raised its sales forecast for 2019 by $50 million to $1.2 billion. The bookings forecast rose by $100 million to $1.45 billion in 2019.

Though Zynga posted a non-GAAP loss in the first quarter, the company attributed it to a rise in deferred revenue that will be recognized in the upcoming quarters. Zynga stock has had a stellar run in 2019, rising over 48%. But does it have more upside potential?

Zynga’s stock price increase means that the stock is trading 3% above analysts’ 12-month target estimates of $5.66. Out of 15 analysts covering Zynga, seven have “buy” recommendations and seven have “hold” recommendations for the stock. The stock has one “sell” recommendation.


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