Zynga Inc Shares Witnessing Drop In Short Interest

zynga earnings

Zynga Inc (NASDAQ:ZNGA) shares saw a declining short interest in May. As of May 15, the total short interest was around 63,269,401 shares, a decline of 2.3% from the April 30th total of 64,726,464, as per the report of Analyst Ratings Network.com. At least 9.0% of the total outstanding shares are short sold.

Bold traders rewarded

Zynga Inc (NASDAQ:ZNGA) stock reached a high of $15.91 in March 2012, and then declined approximately 87% to $2.08 per share by November. At present, the shares are trading somewhere around $3.30, down around 12% for the year to date.

However, bold short traders reaped a 181% return as of March 2014 betting on declining  prices, according to The Street. Zynga Inc (NASDAQ:ZNGA) eventually returned to as high as $5.89 from bargain hunting, short covering and optimism in July 2013 along with a new  management team headed by Don Mattrick.

Recently, several analysts have assigned ratings to the stock. Piper Jaffray analysts have reduced their price target on Zynga shares from $5.00 to $4.50 in a research note published on Thursday, May 22nd. Benchmark Co. analysts have increased their price target on the shares from $3.46 to $3.52 in a research note to investors on Thursday, April 24th. Barclays increased its price target on the shares from $4.50 to $5.00 in a research note to investors on Thursday, April 24th, and assigned an Equal Weight rating to the stock.

Overall, Zynga Inc (NASDAQ:ZNGA) has an average rating of Hold and an average target price of $4.53.

Some optimism on Zynga

The game maker has underperformed on the basis of change in net income from the same quarter a year ago compared to the S&P 500 and the software industry. The net income has declined by 1580.3% compared to the same quarter one year ago, declining from $4.13 million to $61.18 million. Net operating cash flow has declined to -$24.25 million or 191.68% compared to the same quarter last year. Compared to the industry average, the firm’s growth rate is significantly lower.

Zynga Inc (NASDAQ:ZNGA) is making some positive moves on the business front, but shares are still near 52-week lows. However, any improvement in the business prospects of a heavily shorted company like Zynga hould increase the share price. Sell side analysts suggest that the company will post earnings of around $0.02 per share this year and $0.06 per share next year on revenue growth of 12.2% and 20.20% respectively.

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About the Author

Aman Jain
Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at amanjain@valuewalk.com

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