The social games developer has tumbled 9.6% since Monday after it sold off on a disappointing IPO from competitor King Digital (KING) on Wednesday. King, maker of popular app Candy Crush, closed 15.4% lower than its offering price on the day of its debut as investors grew concerned as to whether it could maintain its popularity over the long-term.
On Thursday, SAC Capital filed documents with the SEC notifying of its ownership of 38.7 million Zynga shares, or a 5.3% stake in the gaming company. In its 13-F filing at the end of 2013, the firm disclosed its ownership of 15.8 million shares.
By early afternoon Friday, shares are unchanged at $4.47.
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TheStreet Ratings team rates ZYNGA INC as a Sell with a ratings score of D+. The team has this to say about their recommendation:
"We rate ZYNGA INC (ZNGA) a SELL. This is driven by multiple 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. Among the areas we feel are negative, one of the most important has been weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Net operating cash flow has significantly decreased to $7.73 million or 60.90% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. 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 84.84%. 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 -14.31% significantly underperformed when compared to the industry average.
- The revenue fell significantly faster than the industry average of 10.9%. Since the same quarter one year prior, revenues fell by 43.3%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- ZNGA has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 4.35, which clearly demonstrates the ability to cover short-term cash needs.
- You can view the full analysis from the report here: ZNGA Ratings Report