Zynga shares tumbled nearly 40% Thursday, a day after the company reported earnings that missed analysts’ expectations.
The social gaming firm reported sales of $332 million in the second quarter, lower than the $344 million analysts had predicted. Known for games like FarmVille and Words With Friends, Zynga said profits, excluding one-time charges, were one cent a share, falling short of the six cents analysts expected.
Zynga also lowered its outlook for the rest of the year.
Zynga reported that users on Facebook — one of the gaming company’s platforms — aren’t spending as much on games anymore, leading to lower online revenues from the previous quarter.
In March, Zynga scooped up OMGPop for a rumored $200 million. OMGPop, a six-year-old company, instantly gained a following for its Pictionary-like game Draw Something earlier this year.
It seems that Draw Something has lost traction, as the company cited it as one of several reasons for its lowered outlook, including, “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.”
So the question remains: Is is game over for Zynga?
BTIG analyst Rich Greenfield published a note Thursday, titled, “Downgrading Zynga to Neutral: We Are Sorry and Embarrassed by Our Mistake.”
In it, he wrote, “With management clearly unprepared for the rapid mobile transition that the Internet world is currently experiencing, our confidence in Zynga management diminished, our inability to model Zynga’s earnings, and … we simply cannot justify a ‘buy’ rating on Zynga.”
