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Zynga downgrades forecast, stock price gets mauled

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Overnight, Zynga reported a loss for the second quarter, due mainly to higher costs and expenses and a significant downgrade to full-year earnings guidance. Pre-market traders have given the sock an absolute pasting.

In its quarterly report, Zynga announced some rather disappointing results.

In the second quarter, the company reported a loss of $22.8M or $0.03 per share. Total revenue grew 19% to $332.5M.

In predicting full-year earnings for the company, guidance was down-graded from $0.23 - $0.29 per share to $0.04 - $0.09.

In discussing the earnings, Zynga noted that user growth was completely flat - the only increase being due to the hit received with the acquisition of OMGPOP and all of its Draw Something users.
The market has punished the company heavily. In after-hours trading, the stock is down around 40%, with an expected open of $3.08, down $2.00 from yesterday's close. Of interest, the stock rose 4% in late-afternoon trading in anticipation of reasonable results. That was not to be.

Facebook will report its Q2 earnings tomorrow, but with their well-reported reliance on Zynga as a major source of income (12% is the most commonly reported figure), they too will be expected to report weaker than expected results. The pre-market quotes indicate a fall of nearly 6% to a price not seen since the mid-June post IPO slump.

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David Heath

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David Heath has over 25 years experience in the IT industry, specializing particularly in customer support, security and computer networking. Heath has worked previously as head of IT for The Television Shopping Network, as the network and desktop manager for Armstrong Jones (a major funds management organization) and has consulted into various Australian federal government agencies (including the Department of Immigration and the Australian Bureau of Criminal Intelligence). He has also served on various state, national and international committees for Novell Users International; he was also the organising chairman for the 1994 Novell Users' Conference in Brisbane. Heath is currently employed as an Instructional Designer, building technical training courses for industrial process control systems.

More in this category: « Apple powers ahead Zynga's stock price - did Facebook force it down? »
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