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Wednesday, July 25, 2012

Reversal of fortune for Zynga; stock down 40% after poor earnings

A weak second-quarter earnings report and worse expectations for the rest of the year sent Zynga’s already faltering stock down in late trading Wednesday by more than a third, to $3.18 a share.

Looking at the results, its hard to find any bright spots for the social gaming giant.

Revenue was $332 million, up 19% year over year, but falling short of analyst expectations. Moreover, bookings were down 8% compared with the first quarter of 2012.

Zynga also reported a net income loss of $22.8 million, thanks in part to a $95.5 million stock-based expense.

The company reported a diluted earnings per share (EPS) loss of ($0.03) for the second quarter and a non-GAAP (generally accepted accounting principles) EPS of $0.01.

Zynga also adjusted its outlook for the rest of 2012 in order to “reflect delays in launching new games, a faster decline in existing web games due in part to a more challenging environment on the Facebook web platform, and reduced expectations for Draw Something.”

The Facebook revelation is interesting, as it could indicate either increased competition on the platform or larger monetization problems on Facebook itself.

The unexpected news was seen as boding ill for Facebook, which is closely tied to Zynga and will issue its first earnings report as a public company on Thursday. Facebook shares fell 8 percent in late trading.

*** chart before earnings ***
 ** weekly **

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