Shares of Zynga (ZNGA, Financial) fell 0.8% to be valued at $2.44 on Thursday, reacting to a press release announcing that previous CEO Mark Pincus is talking to former executives in order to come back to the company. Pincus would take back the CEO position from former executive Don Mattrick.
Financial Matrix
Zynga’s net income decreased by 78.8% when compared to the same quarter a year ago. The net income fell from -$25.24 million to -$45.13 million
The gaming giant’s opened Thursday at $2.46 with a 52 week low of $2.20 and a 52 week high of $4.66. The stock’s 50 day moving average read $2. Zynga’s market cap is $2.24 billion.
Social gaming apps revenue dropped 10% year over year to $154 million in March this year. Sales per month in the segment are now down 42% after peaking in May 2012. Overall sales, however, in the digital gaming market increased by 2% year on year to just more than $1 billion last month.
Comeback equations
Mark Pincus has his work cut out for him once he resumes his role as CEO of Zynga.
Zynga has struggled with the transition to mobile devices, which in recent years have become the most popular platform for casual gaming. Zynga’s lucrative desktop gaming business was ruined by the global boom of smartphones globally, as a large chunk of the user-base moved to mobile-friendly titles.
The next logical move for Pincus would be to hire back the executives who helped make Zynga the gaming powerhouse it once used to be. Under Pincus’s watch, however, the company gave away its market share to developers like King Digital (KING, Financial) and Supercell, creators of popular games like Clash of Clans and Candy Crush Saga.
That being said, Zynga is still very profitable and prominent in the gaming world. Its revenue in 2014 was $690 million compared to an industry average of $95 million. The company boasts of a healthy balance sheet and looks good for mergers and acquisitions that might be a possibility to help get the company out of the doldrums.
Company profile
Zynga is a provider of social media games. The company develops, markets and operates social games as part of live services that players can access over the Internet, social media websites and mobile platforms and other Wi-Fi devices. The company’s games are predominantly found on Facebook, Zynga.com and social networking sites.
Analysis
ZYNGA’s gross profit margin for the fourth quarter 2014 is unchanged when compared to a year ago. Even with increased sales, the net income has dropped, representing a much lower bottom line. Zynga’s quick ratio is 2.87 illustrating the company’s ability to cover short-term cash needs and a high level of liquidity within the gaming company. Zynga’s liquidity, however, has dropped since the same period last year.
Even the stockholder’s net worth remains unchanged from the same quarter last year. Overall, the key liquidity factor shows Zynga to be able to handle any financial difficulties in the near term only.
Analysts have rightfully given Zynga a SELL rating thanks to factors such as a dropping net income, a deplorable return on equity, weak operating cash flow, a bad history of the stock itself and minute growth in its EPS.
