Zynga shares fall 20 percent following its preliminary report for its third quarter released yesterday. The company expects to lose between $90 million and $105 million in its third quarter and it lowered its forecast for its full 2012 fiscal year.
Zynga shares before the report were at $2.81 and during its pre-market valuation today was valued at $2.29. Zynga stock hit a low of $2.22 earlier today and has bounced back slightly to $2.35.
Analysts aren’t sure that Zynga will be able to bounce back. Over 90 percent of its business comes from social networking site, Facebook, and is currently to try to build its own mobile gaming platforms. The results haven’t been up to par with what it experienced on Facebook.
“It is clear that Zynga will not be able to counterbalance social-gaming headwinds this year with its success in mobile and its broader network buildout,” R.W. Baird software analyst Colin Sebastian said in a release. “The company’s platform transition could extend well into 2013, requiring the ongoing realignment of resources and alterations to product development.”
“They have to convince investors that they can balance costs and revenues,” Wedbush Morgan software analyst Michael Pachter told GamesBeat. “Revenues aren’t growing at all, so they have to cut costs and compensate for the lack of growth. Their secondary concern should be how to begin growing again.”
“They are far from going out of business, and revenues will be ‘only’ $1.2 billion this year,” Pachter added. “So it’s premature to assume they are in real trouble. They just have a credibility problem with investors.”
Article from Gamersyndrome.com
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