There was little optimism going into Zynga‘s (NASDAQ:ZNGA) third-quarter earnings report, and for good reason. Back in early October, the company announced preliminary results, and they were horrible, sparking a roughly 25% sell-off since then.
Well, the quarter still ended up being awful — but ZNGA shareholders got a bit of good news Wednesday afternoon that was driving the stock up almost 15% in after-hours trading.
CEO and co-founder Mark Pincus announced something investors have wanted for quite a while: a move into online gambling.
Zynga has formed a partnership with U.K.-based gaming operator bwin.party. The pair will offer 180 titles spanning classic casino games like blackjack, slots and roulette, with the launch expected sometime during the first half of 2013.
This is a smart move — not just because Zynga has had success with non-gambling gaming titles such as Zynga Poker, but because the monetization also could be much more lucrative when you throw in real cash payouts.
However, the bwin.party deal was not the only good news that came out of the earnings release. Zynga said its blockbuster sequel FarmVille 2 is up to 60 million monthly active users following its September launch, and Zynga also announced a $200 million stock buyback program.
The quarterly numbers themselves still were awful — revenues grew by only 3% to $316.6 million, resulting in an overall loss of $52.7 million, or 7 cents per share. ZNGA broke even on an adjusted basis, though, beating expectations for a penny-per-share loss.
Still, it appears Zynga’s stock might have found some sort of bottom. According to analysis from a JPMorgan Chase (NYSE:JPM) analyst, the asset value of Zynga — including real estate, cash and investments — is about $2.46 per share, just more than where ZNGA was trading after hours.
True, this does not equate to a good investment. Zynga needs to start producing hit games again and also find ways to monetize mobile. However, the company has enough resources to get things back on track, and following the announcement of a 5% reduction in its work force, looks to be focused on streamlining its operations.
And as seen by its Q3 numbers, Zynga finally might be getting some of its groove back.
Tom Taulli runs the InvestorPlace blog IPOPlaybook, a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of “How to Create the Next Facebook.” Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.