Zynga (ZNGA, Financial) stock has dropped about 40% since the start of 2014 because of a steep fall in users, growing losses and an absence of new hit games, and it doesn't appear the fall will end at any point in the near future. Zynga posted a more extensive final-quarter loss than the prior year and expected revenue for its present first quarter beneath analysts' estimates.
The organization reported that the quantity of Zynga game players declined in the final quarter. Daily active users tumbled to 25 million from 27 million from a year prior, monthly active users fell 4 million to 108 million, monthly exceptional users dropped by 9 million to 71 million, and monthly remarkable players tumbled to 1.1 million from 1.3 million.
In the aftermath of the earnings report, the organization's shares dove 43 pennies, or 16%, to $2.23 the day following. This is bad news as constantly declining users paint a bad picture of Zynga’s future, and the company may continue moving lower.
Falling giants
Waning popularity of core games
Zynga's three center games –Â Farmville 2, Zynga Poker, and Hit It Rich –Â represented 61% of its top line in the third quarter. Shockingly, enthusiasm toward every one of the three games has melted away, as per their rankings.
The quick decreases of Farmville 2 and Hit It Rich are alarming, since it implies that Zynga must adapt its contracting gamer base all the more viably to create a relentless stream of revenue. Sadly, Zynga's payer change (allowed to paid player) rate was just 1.8% – a drop from 1.9% in the second quarter and just a moderate change from a 1.6% rate a year prior.
Problem with CEO
Zynga welcomed the arrival of Don Mattrick as its new CEO over a year ago. However, things haven’t worked out well for the company since then.
The issue with Mattrick's methodology is that it dismisses Zynga from making non-authorized games. Imprint Porter, Zynga's general chief in New York, once conceded that large portions of Zynga's games were clones of more seasoned games. At the same time at any rate those games didn't oblige extra permit expenses. Presently, Zynga is prepared to pay the NFL and Tiger Woods authorizing expenses for extra brand distinguishment. That is an insecure methodology when the organization's top line is declining and how the money adds up stays profound in the red. It likewise tells investors that Zynga has just used up thoughts.
Conclusion
While investors may still hope Zynga to turnaround in 2015, it looks like a sell to me. The aforementioned headwinds will take its toll on Zynga and the failure to come up with new games will further deteriorate Zynga’s condition. Hence, Zynga is a sell.
