Zynga Crashes Hard As Reality Sets In
I don't know about you, but I've got October 24th circled on my calendar. Right around 2pm PST, I'm planning on sitting down with a big bowl of popcorn, putting my feet up and waiting for the fireworks to begin on the Zynga conference call.
For those who may have missed Thursday's news, the social gaming company not only pre-announced a loss of 12 to 14 cents a share for its upcoming third quarter but also slashed its full-year guidance and then, just for fun, booked an $85 million "impairment" charge for its much-touted acquisition of rival game maker OMGPOP. Shares of Zynga opened down another 20% Friday at a new all-time low. I don't know about you, but it sounds like there are a lot of things that are "impaired" at Zynga at the moment.
This is a company that went public less than a year ago with all of the hype and fanfare of Y2K dot com blockbuster. But since then, Zynga has seen its shares falter by over 70% as management has proven that it would be better off throwing darts to predict its earnings than using whatever methods they currently employ.
Hats off to analyst Colin Sebastian over at Baird, who late yesterday downgraded Zynga from buy to neutral, as he now suddenly questions the viability of a turnaround at the newly-minted company. I'm sure investors will appreciate Sebastian saving them from losing their final $2.80 a share. Is it just me, or is it bothersome that we're talking about a turnaround at a company that just came public last December?
I've already offered up my thoughts on Zynga in my post entitled "Don't Gamble On Zynga's Gambling Gamble" and today's news just reinforces those views. Zynga is a dangerous stock and investors would be wise to steer clear. Makes me wonder just how well Facebook is really faring, as 10% of Facebook's revenues stem from fees paid by Zynga.