Listen I've watched justified panic ... this ain't it
Over the years, we've all seen or read about justified panic ... ponzi schemes, falsified financials, major product liabities/legal problems, a drug that did not get approved, a flooded copper mine, a strike that shuts down a company, etc ... This is not one of those situations. Zynga did not lose money during the last quarter and with the reduced bookings this quarter (as new games are launched), they are projecting a loss of $40 million ... Wow!
A $40 million loss for a company with $1.7 Billion in cash and no debt during a "transitional year" ... it's just not a huge deal. This is why Dell is trying to go Private ... because the market overreacts to transitional periods. Zynga is transitioning to mobile and real money gambling. These are big moves. Look at Nevada and New Jersey ... they approved online gambling but it is taking months to get everything in place.
Am I happy about the reduced booking for this quarter, lack of progress on the buyback, or possibility of additional equity compensation ... no, but they are all justified. It takes time to replace bookings as new games are launched ... they can use the capital intended for the buyback to support the stock during this transitional period ... and, equity compensation is used to attract/retain talent in this sector.
Zynga is doing a good job managing their balance sheet while making huge internal changes and completely altering the focus of the company. A rational market should reward them for this ... but, this is not a rational market. I've seen justified panic, this is not justified. I will be buying (again) on any significant decline should it occur. I believe Zynga will make the transition to mobile gaming and real money gambling ... and they will not be a $3 stock when they do.