Ahead of the Bell: Zynga's 1Q results

Associated Press

NEW YORK (AP) -- Zynga' s first-quarter results will likely exceed Wall Street's expectations — but mainly because of the company's conservative guidance, not because the health of its business is changing, said Sterne Agee analyst Arvind Bhatia in a note to investors Wednesday.

Online game maker Zynga Inc. is scheduled to report its quarterly earnings after the stock market closes on Wednesday. Analysts, on average, are expecting a loss of 3 cents per share on revenue of $264.5 million, according to a poll by FactSet.

In February, Zynga forecast an adjusted loss of 5 cents to 4 cents per share and revenue of $255 million to $265 million.

"We believe growth in social gaming remains challenging," Bhatia wrote. "For Zynga, any hope for real, sustainable top-line growth likely rests primarily on opportunities in online gambling — opportunities that are at least a year away."

Zynga signed a deal last fall to offer online poker and casino games in the U.K. It launched two such games, "ZyngaPlusPoker" and ZyngaPlusCasino," earlier this month.

Zynga's business in the U.K. is much smaller than the company's U.S. market. Other analysts have said that legal online gambling in the U.S. would be a key driver for Zynga stock.

Internet gambling is legal in the U.S. only in New Jersey, Nevada and Delaware.

Shares of San Francisco-based Zynga rose 2 cents to $3.20 in premarket trading.