Zynga Inc (NASDAQ:ZNGA) is due to release its earnings report for the first three months of 2013 today after the market closes. The company is in a transitional period, something special for such a young firm, and this quarter’s results are expected to fall below those in past quarters. Despite that, investors are optimistic although shares were down a fraction on today’s market.
A JPMorgan Chase & Co. (NYSE:JPM) report on the firm points to its underlying strength, despite its business weaknesses right now, and presents the first quarter of 2013 as a low for the company that the analysts expect it to recover from quickly. The analysts estimate that the company holds cash of $2 per share, meaning little downside for a company trading at $3.16.
The report maintains a neutral rating on Zynga Inc (NASDAQ:ZNGA) shares however, because the firm simply hasn’t proved it can manage its business effectively.The recent move into gambling makes the company a more attractive buy, but its a competitive market, and Zynga Inc (NASDAQ:ZNGA) may not be able to keep up.
The most important indicators that will come out of this earnings report, according to the JPMorgan Chase & Co. (NYSE:JPM) report, will be the revenue guidance for the coming year, mobile monetization, the gaming pipeline, the firm’s share repurchase program, and an update on traction at Zynga.com as opposed to Facebook usage.
Social gaming is a difficult market, and Zynga Inc (NASDAQ:ZNGA) managed to build its business by leveraging Facebook Inc (NASDAQ:FB) as a social platform. As the company moves away from the social network, its still questionable whether or not Facebook will allow gambling on its site. It will need to show increased pickup of its games on other platforms to compensate.
Zynga Inc (NASDAQ:ZNGA) is expected, by consensus, to announce a loss of 3 cents per share in its earnings report on revenue of $265 million. In the first three months of 2012, the company managed to earn 6 cents per share on revenue of $321 million. The JPMorgan Chase & Co. (NYSE:JPM) analysts expect the company to reveal earnings a bit lower than those expectations, with EPS of ($0.04), and revenue of $209 million.
The conclusion of the JPMorgan Chase & Co. (NYSE:JPM) analysts is that Zynga Inc (NASDAQ:ZNGA) is better run and opening up new business spheres right now, but it has a long way to go. Investors are aware of that, and they’ve sent the shares up 33 percent in 2013.