3. Lastly, let's look at Zynga, the online gaming platform.
- Monday's range: $2.92 - $3.09
- 52-week range: $2.70 - $5.89
- Monday's volume: 35,914,815
- 3-month average volume: 23,386,000
Zynga traded up 5.84% on Monday and closed at $3.08.
Zynga is in a rounded-bottom breakout pattern -- shares closed over the 50-day simple moving average. Zynga has been in a big downtrend since March, down nearly 50% from its 52-week high that was reached in March. Zynga reported positive earnings on Aug. 7, and shares have traded up since. The stock is up 14% from the low prior to the earnings report. Yesterday, Zynga closed over the 50-day simple moving average on above-average volumes, piquing my interest.
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 several weaknesses, 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 deteriorating net income, disappointing return on equity 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 295.6% when compared to the same quarter one year ago, falling from -$15.81 million to -$62.53 million.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness 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.
- In its most recent trading session, ZNGA has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. 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 revenue fell significantly faster than the industry average of 11.6%. Since the same quarter one year prior, revenues fell by 33.6%. The declining revenue appears to have seeped down to the company's bottom line, decreasing earnings per share.
- The gross profit margin for ZYNGA INC is currently very high, coming in at 79.53%. 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 -40.80% significantly underperformed when compared to the industry average.
- You can view the full analysis from the report here: ZNGA Ratings Report