Zynga Inc (NASDAQ:ZNGA) will lose Zing no matter what it plans
Zynga Inc (NASDAQ:ZNGA) has not been able to rake in any profits since its 2011 December Initial Public Offering. Though ZNGA stock has climbed over 40% in 2013, investors should by no means expect that the company’s earnings are going to send the stock northwards.
Lately, a great deal of optimism in the company has come from the fact that it has poached Don Mattrick, the Xbox executive from Microsoft to replace Mark Pincus who held the company’s reins. This has been coupled with distinct hopes that the company will garner more profits by foraying into the real gambling arena instead of wearing blinkers and sticking only to video game poker. The market sentiment was that this will result in significant growth and a spanking-new stream of revenue. However, both these things seem more like a mirage and are not based on any solid facts.
Earnings preview time
ZNGA will be announcing its Q2 earnings on Thursday and is expected to report a loss that is wider than the one it suffered in 2012. The analyst projection is that Zynga will be taking a 7 cents/share loss in comparison to the 6 cents/share that it took in the same period last year. There is no change in the average analyst estimate over the last one month but it has dropped from the previous quarter when there was a 4 cents loss.
For the current financial year, analysts are expecting a 17 cents/share loss. A year ago, the company’s revenue stood at $332M and in this quarter that is expected to drop by 44% to $185M. The annual revenue is expected to come it at $819M. Initially, the root of the company’s woes lay in troubles with its FarmVille empire on FB. This had seen a major decline as users were transitioning to accessing games via mobile phones. The company was also fraught with issues in transparency in accounting and the decline just kept getting steeper.