Reality Sets In At Zynga: Virtual Farm Animals Are Boring (ZNGA, FB)

Zynga, Inc. (NASDAQ: ZNGA) is feeling the wrath of an analyst call from Cowen today, with a neutral rating.  It was not the formal call but the implication which matters here.  The report cites a declining use as more and more Facebook, Inc. (NASDAQ: FB) are switching to mobile.  Obviously, that would not be very good for freemium social games and monetizing these efforts will be harder and harder.

To prove just how bad this is, Zynga is down at an all-time post-IPO low.  Shares hit $4.92 this morning and are down 9.4% at $5.02 on almost 29 million shares as of 11:41 AM EST and the prior post-IPO range had been $5.51 to $15.91 before today’s large drop.  Zynga is one of our 11 reviewed companies in-depth where shareholders have no power at all.

So here are some questions that shareholders need to ask… Has the public just grown tired of playing games with virtual farm animals?  Is the social craze going to continue running into pressure now that Facebook’s IPO cost so many people so much money?  Is there just a product refresh cycle at work?

Cowen points to an acceleration in the decline of use.  Zynga still trades with a market value of $3.7 billion. The consensus Thomson Reuters target for sales were $1.45 billion for 2012 and $1.76 billion for 2013.  Perhaps the biggest question is simply this… What if those revenue projections from Wall Street analysts are just to high?

Yet one more post-IPO where billions of dollars have been lost in companies where shareholders have no power.

JON C. OGG