Posted by: conservativecritic | October 10, 2012

ZYNGA – ANOTHER SOCIAL MEDIA LOSER…

Wall Street consensus had been for Zynga (NASDAQ: ZNGA), already suffering from a plunge in its stock price since its IPO in December 2011, to come in at zero cents per share in earnings for the third quarter. October 4th, however, was “take out the trash day” as the company made three negative announcements.

The first was somewhat expected: The (cash!) acquisition of OMGPop, which appears to have come mere weeks before that company’s usership peaked, will be the target of a write-down in the neighborhood of $90 million.

The second was the company’s expectation that earnings per share for the third quarter of 2012 would be in the range of zero to a loss of one cent (excluding the OMGPop charge).

The third was most worrisome for Zynga followers: Estimates of “bookings” (a metric Zynga believes is more relevant than revenue) for the full year were cut by $100 million, with an expectation that Q3 bookings would be 16% below what the company did in the second quarter of the year.

In other words, Zynga is not only at the borderline of profitability; it is currently a shrinking, not growing, business.

The takeaway: It is now entirely possible that the best quarter in Zynga’s history will be the six cents per share that it earned in the first quarter of 2012, just three months after the company went public.

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