Zynga falls as analyst says results will get worse

Zynga skids as analyst says Wall Street estimates for 4th quarter and 1s quarter are too high

Associated Press

NEW YORK (AP) -- Shares of Zynga declined Thursday after an analyst lowered his estimates and said the video game maker won't live up to Wall Street's expectations.

THE SPARK: Sterne Agee analyst Arvind Bhatia said he expects disappointing fourth-quarter results and first-quarter outlook for the San Francisco company. He rates Zynga shares "Neutral" and trimmed his booking estimates for both periods. Bhatia said investors expect the company to return to growth soon, but he disagrees.

"The Street is expecting fourth quarter to represent the 'bottom' and bookings to begin growing in the first quarter," he said. "Based on current traffic patterns, this seems unrealistic."

He said the company's business could reach a low point in the first or second quarter, but it's not clear if that will be the case.

THE BIG PICTURE: Zynga's biggest hits, like "FarmVille" and "Mafia Wars," have primarily been played on desktop and laptop computers that have been declining in use, and the company is trying to tap into games played on smartphones and tablets. It also considered offering online casino-style games in the U.S., but gave up on those plans.

The company expects to report $175 million to $185 million in revenue and $130 million to $140 million in bookings in the fourth quarter.

Analysts expect $181.7 million in revenue, according to FactSet.

Bhatia is forecasting $130 million in bookings in the fourth quarter and $116 million in the first quarter of 2014. He had expected $137 million in each quarter.

SHARE ACTION: Zynga stock slid 38 cents, or 9.4 percent, to $3.65 in afternoon trading. The company went public in December 2011 with an IPO that priced at $10 per share and the stock peaked at $15.91 in March 2012.

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