Zynga Stock Gaps Lower on Earnings Miss, Slashed Outlook

The firm's revenue also missed estimates

Deputy Editor
Aug 6, 2021 at 10:12 AM
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The shares of Zynga Inc (NASDAQ:ZNGA) are plummeting this morning, last seen off 15.1% at $8.30 after the online gaming company posted second-quarter profits of 4 cents per share, missing analysts' estimates by 5 cents, while its revenue for the quarter also came in below expectations. Additionally, the Farmville creator cut its full-year net bookings forecast, adding that it saw "greater-than-expected audience declines" as Covid-19 restrictions began to loosen. Separately, Zynga announced it was buying China's StarLark in a $525 million cash-and-stock deal. 

More than a few analysts chimed in followed the earnings miss. In fact, at least six lowered their price targets, the lowest coming from Benchmark, which slashed its price objective to $10. Coming into today, the 12-month consensus price target of $12.52 held a hefty 50.8% premium to last night's close. 

Considering ZNGA's recent negative trend on the charts, as well as its recent breach of the year-to-date breakeven level, more bear notes could be on the horizon. Ahead of today's session, all but one of the 14 covering the security called it a "buy" or better. 

Digging deeper into Zynga stock's technical setup, the equity has run into pressure in several places on the charts. Most recently, the 10-day moving average has helped guide the security lower, while the $11.25 level played a role in snubbing out two rallies earlier this year. 

An unwinding of optimism in the options pits could also mean more headwinds for ZNGA. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock sports a 50-day call/put volume ratio of 12.46, which stands higher than 62% of all other readings from the past year. This means options traders are picking up calls at a quicker-than-usual clip. 

A look at today's options trading shows 14,000 calls and 3,098 puts across the tape so far -- four times the intraday average. The August 10 call is the most popular, followed by the 8 call in the same monthly series, with positions being opened at the latter. 

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