Shares of gaming stock Zynga (NASDAQ:ZNGA) plunged more than 18% on Friday after the company released its second-quarter earnings.
Revenue of $720 million for the period grew 59% year over year and Zynga also posted a profit of $28 million compared with a loss of $150 million a year earlier. However, the company noted that with COVID restrictions easing and people spending more time outdoors, users were playing less than before. And that was indicated in the company's guidance. The company now projects that net bookings for the year will come in at around $2.8 billion -- a reduction from its previous forecast of $2.9 billion.
Even though Zynga had a strong performance in Q2, it wasn't enough to keep the stock from falling as investors look to be concerned with the company's future and its ability to continue producing such high numbers. Zynga also announced last week that it would be acquiring StarLark through a combination of cash and stock. Not only will that have a dilutive impact on the stock, but it could lead to an increase in expenses in the near term. Zynga projects that for the third quarter, its revenue will fall to $665 million and it will incur a loss of $110 million.
Analysts were quick to slash price targets for Zynga last week, with many now projecting the stock to go no higher than $12. There could still be some great gains to be made on Zynga but given last week's sharp sell-off and investors moving away from stay-at-home stocks, it may be better to wait to see if the stock will plummet further before picking up shares of Zynga.
