This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Zynga Shows Signs of a Turnaround to Play for Outsized Gains

Mattrick built his team for the turnaround including Clive Downie, COO and Alex Garden, President of Zynga Studios. Now this team needs to show investors some meaningful earnings results, which Mattrick said won't be truly be seen until 2015.

Another improved quarter like the first-quarter 2014 results will go a long way to reassuring investors that ZNGA is headed for some nifty capital gains. Though the company reported an adjusted Ebitda of $14 million for the first quarter, the company lost $61 million and shed $343 million from its cash/cash equivalent account, with the latter due to write downs.

However, by improvement, we suggest investors should watch the "Audience Metrics," "Monetization" of that audience, and "Bookings," to glean whether evidence of a ZNGA turnaround truly exists. ZNGA management considers these three metrics as "key," according to SEC documents. And so do we.

Chart Notes: "DAUs" mean daily active users of our games, "MAUs" mean monthly active users of our games, "MUUs" mean monthly unique users of our games, "ABPU" means average daily bookings per average DAU and "MUPs" mean monthly unique payers of our games. Unless otherwise indicated, these metrics are based on internally-derived measurements across all platforms on which our games are played.

Source: ZNGA Form 10-Q Quarterly Report - Q1 2014

Source: ZNGA Form 10-Q Quarterly Report - Q1 2014

Source: ZNGA Form 10-Q Quarterly Report - Q1 2014

From the charts, above, the MAU statistic from the "Audience Metrics" chart indicates a rise of approximately 10%, but also only show a 7.5% rise in MUU. This appears to imply that, on average, the games have become more addictive to more users. To get a better look at the trend in "addictiveness" of the games, the table, below, illustrates that ZNGA is moving in the right direction - back to user addictiveness levels of a year ago.

By dividing MUU by MAU (MUU/MAU), investors can gauge whether the trend in addictiveness is rising or falling. According to the first-quarter results, ZNGA may have turned the corner.

2 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,055.87 -116.81 -0.68%
S&P 500 1,982.77 -11.52 -0.58%
NASDAQ 4,508.6880 -19.0010 -0.42%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs