ZNGA Plunges After Earnings. Is it Time To Buy?

Videogame developer Zynga Inc. (ZNGA) won’t be beating any high scores anytime soon. Right after market close today, the company, which tailors its video games to online social platforms like Facebook, reported a net loss of $62.5 million, or $0.07 per share. This represents a step back from the year ago quarter, when Zynga reported a net loss of $15.8 million.

Excluding special items, the company’s earnings were breakeven per share, compared with a loss of $0.01 per share last year. This matched estimates. At the same time, revenue plunged 34% year-on-year to $153.23 million, well short of analysts’ estimates of $191.21 million in revenue.

But the real nail in the coffin was the company’s pessimistic third-quarter guidance. Zynga expects an adjusted loss of $0.01 to $0.00 per share on $160 million to $170 million in revenue. This is also significantly below the Street view, which calls for $0.01 EPS on $212.35 million in revenue.

And looking farther ahead, the picture isn’t any better. For FY 2014 Zynga lowered its earnings outlook to a loss of $0.01 to $0.00 per share. Earlier, the company had projected adjusted EPS between $0.01 and $0.03.

There really just wasn’t much to inspire folks in this earnings report, so ZNGA shares plunged in after-hours trading. When you run ZNGA through my Portfolio Grader screening tool, you can see that this stock earns a D for its Fundamental Grade, a C for its Quantitative Grade and a C for its Total Grade. That makes ZNGA a hold in my book, but once I plug in these latest results, there’s a fair chance that I’ll need to downgrade it even further. So I do not recommend ZNGA for new money right now.

Sincerely,

Louis Navellier

Louis Navellier

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