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Zynga Shares Slip 18 Percent in One Day

| 16 Feb 2012 15:30
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Zynga's share price plunged nearly 20 percent in a single day following the release of the company's first-ever quarterly financial report.

I don't know much about the stock market but I'm pretty sure that when a company's share value drops 18 percent in a single day, that's bad. And that's what happened to Zynga in the wake of disappointing quarterly financial results in which the company reported significantly increased earning but still posted a GAAP loss of $435 million. That loss was caused by the issuance of $510 billion of "stock-based compensation" to employees that was triggered by the company's December IPO.

Zynga also projected bookings of $1.35 to $1.45 billion for 2012, representing year-over-year growth of about 20 percent, a decent rate but still only half of the 38 percent year-over-year growth posted in 2011. Zynga COO John Schappert said the company's games were built for long-term growth, however, telling Reuters, "That's why we still have the six-most played games on Facebook."

The big drop leaves Zynga shares at just a little over $12, which still represents significant growth over the $10 valuation of its IPO. At one point the company's share price dropped below $9 but had bounced back and climbed to over $14 prior to yesterday.

Despite the slowdown, analyst firm Robert Baird & Co. expressed confidence in the company's long-term positioning, writing in a research note, "While growth has slowed for both Facebook and Zynga, long-term secular shifts in content consumption, along with significant growth opportunities on smart devices from Apple and Google are too compelling to ignore."

Source: Develop

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