Zynga Inc (NASDAQ:ZNGA) received an Underperform rating from the Bank of America Corp (NYSE:BAC) with a price target of $3.80. Following the downgrade the stock slipped 1.16% to $4.35 shortly after the market opened on Monday. Separately, analysts at The Street assigned a Sell rating to the stock with a score of D+ and detailed the different perspectives they took into consideration before assigning the rating.zynga

Balance sheet with few positives and negatives

Analysts at The Street noted that the stock is undergoing various issues that will affect its strength, making it more challenging for investors to achieve positive results. Cash flow is one such area where the company is running short, according to analysts.

For Zynga Inc (NASDAQ:ZNGA), the net operating cash flow has dropped substantially to -$4.86 million or 116.11% against the corresponding quarter of the last year. Compared to the industry average, Zynga has a very low growth rate.

Zynga’s current return on equity (ROE) has significantly increased compared to the same in the comparable quarter of last year, which reflects some positivity in the company. However, when compared to the software industry average and overall market, the ROE declines significantly. Revenue declined at a higher pace than the industry average of 11.5%. The bottom line of the company remains unaffected with revenue decline as earnings per share has increased, note the analysts at The Street.

The game maker has a very high gross profit margin of 87.65%.  Compared to the same period a year ago it has increased substantially. Net profit margin has, however, dropped -0.03%, but is in line with the industry average.

Zynga Inc (NASDAQ:ZNGA) has zero debt, which is a positive sign for the company. Quick ratio of the company is 3.77, which reflects the ability of the company to cover short-term cash needs.

Future more important than present for Zynga

Recently, Zynga Inc (NASDAQ:ZNGA) released its fourth quarter results, where the performance was more or less in line with the previous quarters. In the fourth quarter, revenue and bookings dropped compared to the fourth quarter 2012, as well as, sequentially. Daily active users (DAUs) and monthly active users (DAUs) also registered a drop. Players for current running games of Zynga increased marginally, but new titles could not attract additional users.

Zynga is currently undergoing a restructuring phase, and the future outlook is more important at present than the current performance. Management has laid details about various positive initiatives, and the stock surged around 25% following the earnings call.

On Monday, Zynga closed at $4.49 up 2%.