Zynga Inc (NASDAQ:ZNGA) will release its earnings report for the three months through September this afternoon after the market closes on Wall Street. The gaming company is in the midst of an identity crisis at the moment, and its future is uncertain. There seems to be little confirmation about how the company intends to earn money in the coming years. That’s a big problem for investors in the FarmVille designer.
Zynga Inc (NASDAQ:ZNGA) is expected to lose around 4 cents per share for the three month period. Revenue is expected to come in at $188 million. This earnings report arrives on the back of several quarters of revenue decline and more than one recent change in stated strategy at Zynga Inc (NASDAQ:ZNGA).
Social gaming was one of the hottest terms on the market just a couple of years ago. Zynga Inc (NASDAQ:ZNGA) properties like Farmville were at the height of their performance, and it seemed that it would last forever. Zynga went public. It didn’t last forever. The increase in mobile internet usage changed the way that people used social networks, and the social gaming craze died on the back of fatigue.
Zynga Inc (NASDAQ:ZNGA) was once the dominant force in the social gaming market, but now it and a few other firms are fighting for scraps in a difficult industry. Gaming in general is a young business. That makes it difficult to predict outcomes in the industry. Investors who bought into Zynga either didn’t account for this or accounted for it erroneously.
Zynga Inc (NASDAQ:ZNGA) is expected to underline a seven cent loss for the full year 2013 next January. The company earned about the same amount in 2012. Revenue for the full year 2013 is expected to come in at $592 million. Revenue hit $1.3 billion in 2012.
Zynga Inc (NASDAQ:ZNGA) has named some very different schemes to try and reverse its losses. The lack of a coherent strategy at the head of the company is probably doing more damage to shareholder trust than anything else the company has been up to. A hypothetical move to gambling early on in 2013 spurred a large amount of growth in the value of the company, but those hopes disappeared in the middle of the year when new boss Don Mattrick took over.
Zynga Inc (NASDAQ:ZNGA) is apparently going to head mobile now, but the company is late to the game and the industry isn’t any less competitive or unstable than the one it’s fleeing. Zynga is still valued like a growth company despite its lack of coherent vision and its revenue drop off. The stock is currently trading at around 50 times 2012 earnings.
Zynga Inc (NASDAQ:ZNGA)’s earnings and revenue decline appears to be stabilizing, and the company has learned a great deal from its efforts in recent years. Unchecked expansion is unlikely to hit the company again, and it will likely think a strategy out more carefully before actively pursuing it next time around.
Those lessons will mean a lot for the executives at Zynga Inc (NASDAQ:ZNGA) but they may not benefit the firm if the people at the top continue to abandon gaming. Investors have learned a good deal from Zynga’s performance as well. The kind of risks that are prevalent in a market as little understood as gaming were not priced into Zynga Inc (NASDAQ:ZNGA) stock at IPO, nor in the months following the IPO.
It’s possible that this afternoon’s earnings report will bring about another crash in the value of Zynga. Without a coherent model for the future the company is vulnerable. Then again, recent tech beats have resulted in massive expansions.