Zynga shares continue to disappoint

The online game developer hasn't been able to match its IPO price lately.

By Kim Peterson Jan 10, 2012 9:41AM
Image: Couple with laptop (© Corbis)Zynga (ZNGA) continues to cement its place as the biggest IPO failure of 2011.

The online game developer, known for its "Mafia Wars" and "FarmVille" franchises, saw shares drop 9% Monday to just $8 -- 20% below its IPO price of $10 a share.

Is Zynga getting a bad rap? After all, as Forbes points out, Zynga owns the top five games played on Facebook in terms of daily active users. About 95% of its revenue comes from Facebook, in fact. But being popular on Facebook is a far cry from having the steady, growing profit stream that investors like to see.

Check out the following video for more investor concerns about Zynga.

Post continues below.
Zynga is now trapped in a cash death spiral. Forbes' Dave Thier writes that every dollar the company makes is going to cost more than the one that came before it.

Perhaps no one is feeling the pain more than Morgan Stanley (MS), which revealed last week that it owns some 16 million class A shares of Zynga, or 16% of the company. On top of that, Morgan Stanley's mutual funds bought 5.3 million Zynga shares for about $14 each -- and probably thought they were getting a great deal.

Zynga is trying to move beyond Facebook, and last week unveiled a new word game called "Scramble with Friends." It's another title for users who love Zynga's other games, "Words with Friends" and "Hanging with Friends."

One analyst estimates that Zynga ended the year with about 5% fewer users on Facebook compared with 2010. Another bad sign.

Analyst Ben Schachter with the Macquarie Group has more bad news. Only 2.2% of Zynga's 150 million users actually pay for the games, he wrote. That doesn't bode well for a company trying to compete with new game offerings from Apple (AAPL) and other competitors.

I've heard people argue that investors just don't understand Zynga. They aren't playing "Mafia Wars" all day, and they can't see the appeal that Zynga's games have. But what investors do understand are subscriber growth and revenue trends. If they aren't going in the right direction, Zynga shares will head south and never come back.

Zynga's best days might already have passed.
Jan 10, 2012 5:11PM

The reason that no one uses the Zynga games is because they keep adding things and the bigger they try to get the more the games slow down the computers and they all crash on me at least three times a day.  comments can be seen on everyones Facebook accounts in this regard.


Jan 26, 2012 8:21AM
It's the CUSTOMER SERVICE. Zynga treats its customers like garbage. They take us for granted. I've played MW for 3 years & I have always said the game will finally go offline for good due to the immensely poor way Zynga treats its customers, INCLUDING paying customers. I used to believe that silly rumor that Zynga treats its paying customers SO much better but that is a total LIE. Zynga is 2nd ONLY to Facebook in its disgustingly almost CRIMINALLY bad treatment of customers and players. It's a shame FB AND ZYNGA have no pride in the integrity of their companies. I remember when that was an important thing, to be proud of the quality of your business and to value the reputation of your company. After all, what your CUSTOMERS think of your business is ALL THAT REALLY MATTERS in the end, capiche ? THAT ends up being your BOTTOM LINE. 
Jan 10, 2012 5:39PM

I've only been playing Zynga games for a short period of time In my opinion their prices are too high for what you get. Look at farmville, you can get a cute virtual horse for 96 farmville cash. Depending on the deal you get that could equal out to $10 to $30 of real money.


The other thing I think that holds people back is the fact they change the value of Farmville cash from real cash. I have a store and if I took ten dollars from people when they walked in and gave them 30 store cash and then charged them 30 store cash for a $10 item they would feel like they are getting ripped off. They would feel like they were spending $30 real money, It's psychological but that's just how it works.


Just my 2 cents worth :)

Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.


StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

120 rated 1
268 rated 2
439 rated 3
709 rated 4
641 rated 5
609 rated 6
640 rated 7
516 rated 8
272 rated 9
152 rated 10

Top Picks

TAT&T Inc9



Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.