Social game developer Zynga (ZNGA) CEO Mark Pincus sent an e-mail to employees on Thursday, detailedly described what had resulted in the company’s third quarter results below the previously expected. Zynga lowered the guidance for the fiscal 2012 results early Thursday, this also led to the Zynga stock price plunged 19% in the fter-hours trading.
Zynga expects the company’s third quarter net loss to be between $0.12 and $ 0.14 per share, and expects fiscal year 2012 adjusted EBITDA to be $147 million-$162 million, lower than the prior estimate of $180 million to $250 million. Zynga also said that the assets of OMGPOP acquired by Zynga for $182 million in March this year will be written down $85 million to $95 million, because the company did not copy the success of the company’s title game Draw Something. Impacted by this, Zynga stock price plunged more 19% in after-hours trading on Thursday, to close at $2.28, recording a new low.
Pincus said in the e-mail that social game users have been tired of the social games “FarmVille” and “CityVille”, and the company needs a long time to release a new game, resulting in the performance falling short of expectations. Pincus said Zynga has begun to focus on more other category games, such as gambling games, player versus player games, as well as mobile games.
RobertW. Baird said Zynga is over-relies on Facebook and does not have potential in user monetization, along with the lower-than-expected fourth quarter, making the research firm anxious about Zynga’s platform. Robert W. Baird down graded the security from an outperform rating to neutral rating and lowered its target price on Zynga stock from $ 6 to $ 3.
In addition, Schachter cut its target price on Zynga stock from $3.5 to $ 2.5, Wedbush Securities slashed its target price on this stock from $7 to $ 4, and Evercore Partners reduced its target price on this security from $2 to $1. Most other securities brokers set their target prices on Zynga stock around $3.
Macquarie Securities analyst pointed out that with the free games on Facebook increased. Zynga’s payment users are continuing to decline.
Zynga stock price gapped down 19.15% at the openning on Friday, then traded slightly higher to close at $2.48, representing a decline of 11.69%, or $0.34. The intraday volume exploded to $132.05 million shares, ten times the average daily trading volume of 13.40 million shares. Zynga has a market cap of $1.88 billion.