Zynga in Trouble on Lower Projections, Downgrades

Andrew Klips |

Zynga in Trouble on Lower Projections, DowngradesYesterday afternoon Zynga Inc. (ZNGA) estimated ahead of it October 24 earnings call that it expects revenue for the third quarter to be in the range of $300 million to $305 million on an adjusted basis, representing a net loss of about a penny per share. Wall Street was calling for revenue of $287 million.

That’s the good.

The bad is that the online game purveyor also slashed its full year revenue outlook from $1.15-$1.23 billion to $1.08-$1.1 billion. Zynga also lowered its EBITDA guidance from $162 million to $147 million. Analysts were expecting revenue of $1.21 billion and EBITDA of $225 million. The company now anticipates a net loss for the year between $90 million and $105 million and an impairment charge of $85 million to $95 million on the purchase of OMG Pop, the maker of the game “Draw Something.”

Robert W. Baird analyst Colin Sebastian cited Zynga’s lowered guidance as part of the reason for a downgrade to a neutral rating and a price target cut from $6 to $3 for Zynga this morning. Sebastian also noted the company “over-dependence on Facebook” in saying that Baird will be “moving to the sidelines” until the company can show tangible signs of turning the company around.

On CNBC’s Fast Money yesterday, Pete Najarian, nicknamed “the Pit Boss,” warned sharply about Zynga, saying that shares are swirtling around the drain and will eventually be worth nothing.

Shares of Zynga debuted on the Nasdaq in December 2011 at $11 per share. After a run to $15.91 in March, shares have been steadily plunging since. Shares closed trading on Thursday at $2.82.

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Companies

Symbol Name Price Change % Volume
FFH.PR.I:CA Fairfax Financial Holdings Limited Cumulative 5-Ye 18.02 -0.08 -0.44 15,610
ZNGA Zynga Inc. 2.92 -0.03 -1.02 16,161,759

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