Zynga Tops Q1 Estimates But Q2 Outlook Disappoints, Shares Tumble (ZNGA)

Although social gaming company, Zynga Inc.’s (NASDAQ: ZNGA) fiscal first-quarter results topped analysts’ consensus forecast, the outlook on the current quarter and massive drop in the number of people playing its online games disappointed investors, sending shares down by almost 9% in extended hours trading on Wednesday.

The San Francisco-based company, which burst into social gaming scene about three years ago, reported on Wednesday that active users have slumped 13% to 253 million, in the fiscal first quarter, which is the lowest level ever since the number reached an all-time high of 331 million, at the end of the third quarter in 2012.

As competition in the social gaming sector has intensified over the course of the time, Zynga Inc has struggled to retain its users, who once used to log on to Facebook to play it games. Facebook’s huge users’ base provided Zynga with an opportunity to attract millions of potential players.

However, the Company has revised its business partnership with Facebook in the recent past. Now,  Zynga is trying to establish itself as a more of an independent gaming network.

For the fiscal first quarter, the Company reported net income of $4.1 million compared to a loss of $85.4 million. Stripping out onetime items, adjusted earnings came at $9.1 million or 1 cent a share compared to earnings of $47 million or 6 cents a share, in the same quarter of last year.

Revenue during the quarter plunged 30% to $230 million from $329 million, in the same quarter of last year.

Analysts polled by Thomson Reuters were expecting a loss of 3 cents a share on revenue of $210 million.

For the current quarter, Zynga Inc anticipates bookings between $180 million and $190 million against analysts’ estimate of $232 million and loss of 3 to 4 cents a share. Analysts’ consensus estimate was for a loss of a penny a share.

Addressing analysts’ in earnings call, Zynga Inc’s Chief Executive, Mark Pincus said in a statement, “2013 will continue to be a transition year as we face the challenging environment on the web and invest in developing the leading franchises and network across web and mobile platforms and offer our 253 million monthly players a connected experience that can follow them from work to school to home and anywhere in between.”