Zynga Inc Witnessed Heavy Call Option Trading On Monday

Updated on

Zynga Inc (NASDAQ:ZNGA) witnessed some unusual options trading activity on Monday, when traders acquired 11,498 call options of the game maker. This is an increase of 110% compared to the usual daily volume of 5,470 call options.

Analysts not excited

In recent months, various analysts have provided a rating on Zynga. Zacks analysts downgraded Zynga from Outperform to Neutral in a research note to the investors on September 8th. They assigned $3.30 price target to the stock. Separately, analysts at Wedbush lowered their price target on the stock from $7.00 to $6.00 in a research note to the investors on August 8th. Finally, the analysts at Benchmark have slashed their price target from $3.08 to $2.83 in a research note to investors published on August 8th.

Zynga Inc (NASDAQ:ZNGA) is in the red as far as its financial position. As of October 10, the stock price declined to a 52-week low of $2.23. The social gaming company is in troubled waters in the wake of declining operating margins overthe  past three consecutive quarters. There has been a drop in the number of users/players of games spending money on the platform, leading to a decline in operating profits. Operating margins for the industry are flat suggesting Zynga Inc’s margin issues are mostly due to internal problems.

Will Advertising revenue help Zynga?

Zynga clearly has issues today, in stark contrast to the firm’s position when it went public. At that time, games like CityVille were at the peak of popularity and company’s growth rate was incredible. Zynga produced several games that were popular among Facebook users.

At that time, Russian firm Digital Sky Technologies acquired $180 million shares of the FarmVille creator in December 2011, and in 2012 Google and Softbank together invested $300 million into the company. Now, the number of Facebook users playing and spending money on Zynga Inc’s games has significantly declined.

Even with a huge development and advertising budget, the firm’s new titles are not performing well. Advertising still holds some hope for Zynga in the wake of falling revenue. From 2011 to 2012, the earnings of the gaming firm through commercials surged 170%. Ad Age noted “advertising will likely become a crucial revenue stream for the company.” All eyes are now on Zynga Inc (NASDAQ:ZNGA)’s third-quarter results due on November 6th.

Leave a Comment