Zynga shares spike after beating Q4 earnings

Updated: 2:09 p.m. PT: After months of cost-cutting and paring down, Zynga said it earned 1 cent per share on an adjusted basis in the fourth quarter as revenue fell 2 percent to $311.2 million. A year earlier, Zynga lost $1.12 a share in the same quarter.

The report was better than the consensus analyst estimate of a loss of 3 cents per share on revenue of $212 million. Zynga's GAAP earnings were 6 cents per share. The immediate reaction to the numbers in after-hours trading was a sharp surge in Zynga shares.

Zyna's stock finished up more than 7.4 percent before the earnings news hit. Earlier Bank of America/Merrill Lynch put out a buy rating on Zynga. Why a "buy" rating on a $2 stock? According to the analyst upgrade from Justin Post, "investors' risk tolerance with developing business models has increased."

Management said that first-quarter revenue would range between $255 million and $265 million. It also projected a net loss between $32 million and $12 million in the current quarter.

In a prepared release, CEO Mark Pinkus said "the biggest highlight of the quarter was seeing our team deliver a successful sequel in FarmVille2." He added that 2013 would see Zynga "bring this new class of social games to mobile phones and tablets and build a network that offers an easier, better way for people to play together."

Speaking later to analysts on a conference call, Pincus said Zynga had registered "good progress in the quarter," adding that the company was making headway growing its mobile business.

Following up on that theme, COO Dave Ko noted that mobile now represents 21 percent of Zynga's bookings, up from 8 percent a year earlier. He later described 2013 as being "a year of mobilization for Zynga."

Zynga by the numbers: Q4 2012

• Revenue: $311.2 million.
• Bookings: $261.3 million, down 15 percent from year earlier but an increase of 2 percent compared to the third quarter of 2012.
• Net loss: $48.6 million compared to $435 million net loss in fourth quarter of 2011.
• Diluted EPS: ($0.06) for the fourth quarter of 2012 compared to ($1.22) for the fourth quarter of 2011 and ($0.07) for the third quarter of 2012.
• Cash and cash flow: As of December 31, 2012, cash, cash equivalents and marketable securities were approximately $1.65 billion.

More to follow.