Zynga up in premarket trading after 3Q results

Battered Zynga shares jump in premarket trading on cost-cutting plans, buyback

Associated Press

NEW YORK (AP) -- Zynga Inc.'s battered stock got a boost in premarket trading Thursday after the social gaming company's third-quarter results may have given some investors hope that it will be able to revive growth.

The company also detailed cost-cutting plans, a gambling deal in the U.K. and announced a share buyback.

Zynga's shares rose 31 cents, or 15 percent, to $2.44 before the stock market opened. Even with that jump, the stock is far off its $10 initial public offering price from December.

On Wednesday, the company behind "FarmVille" and "Texas HoldEm Poker" reported a third-quarter loss that was widely expected after a warning Zynga gave earlier this month. Users who pay for games, mostly found on Facebook, have declined. And the company hasn't been able to make enough money from mobile games.

The company's July-September revenue topped expectations, although its adjusted earnings guidance for the current quarter fell slightly short.

Still, Zynga's plan to cut costs may allow it to be profitable again after its "steadily deteriorating" performance this year, said Wedbush analyst Michael Pachter. He has an "Outperform" rating on Zynga and a target price of $4. He expects Zynga's stock to be "constrained" over the next several months as investors gauge the company's turnaround efforts.

Others are more pessimistic. While the gambling deal and the $200 million share buyback plan are positives, said Stifel Nicolaus analyst Jordan Rohan, the declines in Zynga's Facebook games business "overwhelm all else." Rohan little insight into the company's potential for growth in 2013.

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