NEW YORK (TheStreet) -- Zynga (ZNGA) rose 4.09% to $3.56, up 14 cents from its previous close of $3.42, at the close of the trading day on Thursday after the online social gaming company posted losses that were better than expected.
Zynga reported fourth-quarter revenue of $147 million, which beat analysts' expectations by $6 million but still marked a steep decline from $261 million in the same quarter one year ago. The loss of three cents a share for the quarter was also one cent better than analysts expected. Daily active users and monthly active users declined 12% and 16%, respectively, from the third quarter, but average daily payments per average daily active user increased 10% from the third quarter into the fourth quarter.
The San Francisco-based company also announced that it would trim 15% of its worldwide workforce. However, Zynga announced that it would buy NaturalMotion, a U.K.-based mobile game and technology company, for $527 million in both cash and stock.
TheStreet Ratings team rates ZYNGA INC as a "sell" with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:"We rate ZYNGA INC (ZNGA) a SELL. This is driven by a few notable weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. Among the areas we feel are negative, one of the most important has been weak operating cash flow." Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Net operating cash flow has significantly decreased to -$4.86 million or 116.11% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Software industry and the overall market, ZYNGA INC's return on equity significantly trails that of both the industry average and the S&P 500.
- The revenue fell significantly faster than the industry average of 12.0%. Since the same quarter one year prior, revenues fell by 36.0%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- The gross profit margin for ZYNGA INC is currently very high, coming in at 87.65%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -0.03% is in-line with the industry average.
- ZNGA has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 3.77, which clearly demonstrates the ability to cover short-term cash needs.
- You can view the full analysis from the report here: ZNGA Ratings Report
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