Zynga shares continue to disappoint
The online game developer hasn't been able to match its IPO price lately.
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.
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.
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 :)
Copyright © 2014 Microsoft. All rights reserved.
Traders might want to bite on BABA, but long-term investors have reasons to wait.
VIDEO ON MSN MONEY
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.