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Zynga Drops 21% After Outlook Falls Short of Estimates

Zynga Inc., the mobile-games maker, fell as much as 21% in extended trading after projecting quarterly and full-year results that missed Wall Street estimates — a sign the pandemic fueled surge in play has ended.

Zynga expects adjusted revenue of $660 million for the quarter ending in September, the company said Thursday. That’s short of the $721.3 million average of analysts’ estimates. The company also sees adjusted earnings of $145 million before interest, taxes, depreciation and amortization, less than what Wall Street projects. Results for the year will also miss.

The company is dealing with two issues: Apple Inc. made changes to its products that let users opt out of being tracked by advertisers, and that’s hurt ad sales. And the lifting of pandemic lockdowns has led to a slowdown in game play — something all of the video-game companies have felt.

“A lot of people went outside, they started doing other things, that’s caused a little bit of choppiness in our audience, especially the audience that joined us in early 2021,” Chief Executive Officer Frank Gibeau said in an interview.

Zynga fell as low as $7.72 in extended trading. The shares dropped 1.3% to $9.77 at the close in New York and are down 1% for the year.

The company is delaying two much-anticipated games. It will now release FarmVille 3 in the fourth quarter instead of the third. And Star Wars: Hunters — its first game that will be playable on a console as well as mobile devices — is likely to be pushed back to the first quarter of next year, instead of being released in the fourth, as the developers work to add more features, Gibeau said.

Zynga also said Thursday it’s acquiring China-based StarLark, developer of Golf Rival, the fast-growing mobile casual golf game in the world, for $525 million in cash and stock. The transaction is expected to close in the fourth quarter.

The company said a number of its games and properties have hit important milestones. Subsidiary Rollic, which makes a slew of games including Arrow Fest and Hair Challenge, has crossed over 1 billion downloads. Zynga Poker delivered its highest second-quarter revenue in nine years, the company said.

Source: Bloomberg