Zynga is King of Losing Money — Investors Still Buying

It’s hard to believe that just a short 3 years ago, Zynga (NASDAQ: ZNGA) was the 800-pound gorilla in the room, when it came to social games. No one thought it could be knocked, until King came along, and brought out its Bejeweled clone, Candy Crush Saga. In a sense, this was probably karma chomping down hard on Zynga’s ass for being for blatantly and shamelessly copying other games from smaller developers in the past. 

After its IPO in late 2011, ZNGA reached its highest share price of $14.69 in February 2012, and has been slammed down to a current share price of about $2.81. During Q3 2014, Zynga reported losses of $57.1M, compared to $68,000 for the same time period one year ago. 

Wow! That’s about an 84,000% increase in its losses. Zynga CEO Don Mattrick has been doing a great job driving the company further into the ground since he took over a little over a year ago. Come to think of it, the Q4 losses nearly equal his $57M compensation package! While Yahoo! CEO Marissa Mayer was rewarded with a similar deal, she at least has been able to get Yahoo!’s stock moving up again. I bet the Zynga board and founder, Mark Pincus is shaking his head now.

Despite all of this though, the stock started to rise after reporting, and has been upgraded from a “hold” to a “buy” with a target price of $4.50 by Jeffries, whose analysts believe that the company should benefit from the launch of new mobile games in 2015, which would offset losses from legacy Facebook games.

I think that the biggest problem with Zynga is that it is a company founded and run by people who have no passion for games. Instead of coming up with fun and innovative games, the company seems to have a tradition of copying other successful games, and then reskinning the games with slightly modified game mechanics, which results in boring games designed to suck money out of you to speed up the grind.

The market is fickle, and it really has no rationality behind it. Once investors figure out that Zynga’s mobile games will just be more of the same, old, boring, re-hashed garbage it has been spewing out over the years, the price will just get slammed again. Hopefully, this next time, it will be for good.