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TheStreet Open House

One Factor Driving Zynga (ZNGA) Stock Down Today (Update)

Update (4:19 p.m.): Updated with Thursday market close information and Mattrick comments.

NEW YORK (TheStreet) -- Zynga  (ZNGA) plunged Thursday amid news that three more executives have departed the social game maker.

Head of acquisitions Terence Fung, former head of the company's "Ville" franchise Steve Chiang and Travis Boatman have left the company. The departures continue the company's ongoing restructuring as CEO Don Mattrick tries to strengthen the executive organization. An announcement on CFO Mark Vranesh's departure came in April.

"One person close to the company said that the changes reflect Mattrick's ambition to remake the company and its strategy so it can be successful in the transition to mobile games," according to Venture Beat, which noted Zynga declined to comment on the most recent departures. "Some of the executives who left did so on their own as they sought out new positions. Mattrick asked others to leave, and still others were reassigned to some completely different roles."

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Mattrick also made comments about his company's financial situation that may have spooked investors, as well. He was asked at a question-and-answer session how he felt about his company's EBITDA margins and mobile game business. "We're nowhere near where we should be when we ultimately have executed," Marritck replied. He added, "we can do better on margins and EBITDA, no doubt about it.

The stock closed down 9.17% to $2.97. More than 150 million shares changed hands, nearly five times the average volume of 32,061,600. The stock had a range of $2.73 to $3.21 for the day and holds a 52-week range of $2.50 to $5.89.

Separately, TheStreet Ratings team rates ZYNGA INC as a "sell" with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:

"We rate ZYNGA INC (ZNGA) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, weak operating cash flow and generally disappointing historical performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Software industry. The net income has significantly decreased by 1580.3% when compared to the same quarter one year ago, falling from $4.13 million to -$61.18 million.
  • Net operating cash flow has significantly decreased to -$24.25 million or 191.68% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • This stock has managed to decline in share value by 0.30% over the past twelve months. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Software industry and the overall market, ZYNGA INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for ZYNGA INC is currently very high, coming in at 83.95%. Regardless of ZNGA's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, ZNGA's net profit margin of -36.41% significantly underperformed when compared to the industry average.
  • You can view the full analysis from the report here: ZNGA Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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