Zynga Shares Plunge 14% After Axing U.S. Gambling Plans
Shares of Zynga (NASDAQ:ZNGA) fell 13% after hours as investors digested news that the social games makers will not pursue a gambling license in the U.S. and new CEO Don Mattrick expressed cautiousness in the quarters ahead.
The games maker, which posted a beat on both the top and bottom lines, also revealed a weaker-than-expected full-year outlook, with non-GAAP earnings between a 9- and 5-cent per-share loss, on the deeper end of average estimates of a 5-cent a share loss.
Shares of Zynga fell close to 14% on the news to about $3.02, their lowest price since February.
The move to axe the U.S. gambling license is a shock to shareholders that had been banking on the maker of “Farmville” and “Zynga Poker” to expand its fleet of real-money products to its domestic market.
“Zynga believes its biggest opportunity is to focus on free to play social games,” the company said late Thursday in its second-quarter earnings report.
Zynga earlier this year launched a real-money poker and slots website as a test in the U.K. through a partnership with bwin.party, one of the world’s largest online gambling companies. At a games conference earlier this month, the San Francisco-based company revealed plans to unveil the Facebook (NASDAQ:FB) version of its gambling games there within a month, with mobile soon to follow.
It will continue to evaluate its real money gaming products in the U.K., but is making the “focused choice not to pursue a license” in the U.S.
The company posted a 31% decline in revenues last quarter to $231 million, better than the consensus view of $183 million, as online game revenue fell 30% year-over-year and advertising revenue slumped 33% to $27 million. Bookings were down 38% to $188 million.
Zynga narrowed its loss to just $16 million from $23 million a year ago, and its adjusted loss of a penny a share topped the 4-cent loss analysts in a Thomson Reuters poll had been predicting, however its shares nevertheless sold off on the outlook and gambling news.
The earnings call marks the first since Mattrick took the helm from Mark Pincus earlier this month.