Zynga (ZNGA, Financial) stock has plunged almost 30% since the start of 2014, because of a mass migration of users, broadening losses, and an absence of new hit diversions.
Toward the end of the second from last quarter, Zynga had 112 million monthly active users (MAUS) and 26 million daily active users (DAUS). That is down from 133 million MAUS and 30 million DAUS in the earlier year quarter. Revenue fell 13% year-over-year to $177 million as it posted a net loss of $57 million, keeping it on track to lose over $200 million before the end of financial 2014. This implies that Zynga will have lost more than $800 million in the course of recent years. Its balanced EBITDA margin came in at only 1% –Â down from 5% in the former year quarter and 8% in the past quarter.
In the midst of all these bearish stats, can shareholders discover motivations to be bullish on Zynga?
Failing acquisitions
For a mobile gaming company so subordinate upon the success of a couple of key titles, failing to launch new high-earning games as the popularity of old ones fail is a catastrophe. Furthermore, Zynga's acquisitions convey considerable risk and may not incorporate well with the organization. 2012 saw the buy of OMGPOP for $200 million. In no time thereafter, client engagement for the studio's chief title dropped sharply.
February 2014 saw Zynga secure NaturalMotion for $527 million in cash and shares. NaturalMotion made the portable hits CSR Racing and Clumsy Ninja, furthermore created the Euphoria engine utilized as a part of the latest Grand Theft Auto series and other titles. These advantages make Zynga more different, yet there's little sign that NaturalMotion's games will prove to be resourceful, or that the Euphoria will be much of a pro to the company's ordinarily low-budget games.
Overdependency on Facebook
In 2013, 75% of Zynga's revenue was originated from its games on Facebook (FB, Financial). Likewise, huge numbers of the players who took up Zynga's games outside of the Facebook entryway had their first prologue to the product through the online networking webpage. The two companies have a contractual association until 2015; however, they are impressively less snug than they were even a few years back because of a 2012 modifying of terms.
Put basically, Facebook controls Zynga's future in light of the fact that the social games distributor has not had enough of an effect in mobile. Should Facebook look to breaking point Zynga's right to gain entrance to its stage or do away with the association altogether, the results for the Farmville company will be grievous. Additionally, Facebook adjusting all the more nearly to one of Zynga's rivals could likewise be harmful to the distributor's business. The person-to-person communication titan could likewise harm Zynga by expanding its own particular advancement deliberations and prioritizing its items on its stage.
Conclusion
In spite of the fact that there are a couple of positives for Zynga not too far off, they're insufficient to counterbalance its center issues – declining users, and three center recreations which are rapidly losing their shine. Thus, in my opinion, Zynga is a sell.
