1-Star Stocks Poised to Plunge: Zynga?

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, online social games operator Zynga (Nasdaq: ZNGA  ) has received the dreaded one-star ranking.

With that in mind, let's take a closer look at Zynga's business and see what CAPS investors are saying about the stock right now.

Zynga facts

Headquarters (founded) San Francisco (2007)
Market Cap $3.7 billion
Industry Home entertainment software
Trailing-12-Month Revenue $1.2 billion
Management Founder/Chairman/CEO Mark Pincus
CFO David Wehner
Trailing-12-Month Return on Equity (40.3%)
Cash/Debt $1.1 billion / $0
Competitors Dena
Electronic Arts

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 56% of the 480 members who have rated Zynga believe the stock will underperform the S&P 500 going forward.

A couple of months ago, one of those Fools, GetDatGuap, succinctly summed up the Zynga bear case for our community:

Look at how they operate -- buy up the biggest game fad (or make a quick copy) and milk it dry. There is no way this is sustainable. Game [developers] HATE this company and they will be out of ideas and a solid workforce shortly. Not to mention, most people who play these games will never spend a dollar on it. This company is going nowhere.

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Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

Read/Post Comments (3) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 13, 2012, at 10:29 AM, azcynsun wrote:

    Another article with direct intent to mislead investors and 'manipulate' the stock for personal gain right before earnings. You obviously don't understand the 'bigger picture' with ZNGA, relative to the technology platform and the position they are in to capitalize on it. This allows them to diversify their portfolio, broaden their partnerships, and capitalize on new revenue streams. Are you even considering their global strategy (and the recent relationships they have developed) when you put bias articles out like this? You're losing credibility!!!!!!

  • Report this Comment On July 13, 2012, at 12:17 PM, Teacherman1 wrote:

    I hope it "drops like a rock", so I can fill my position at a much better price.

    They have enough time and money to make it work, it is just a learning curve for now.

    Think Interactive TV show and a drawing program.

    Will take some time, but will pay off if bought low enough.

    JMO and worth exactly what I am charging for it.

  • Report this Comment On July 13, 2012, at 5:27 PM, benjaminwwood wrote:

    Brian D. Pacampara you write a really misleading article and many might say biased like the majority of the 'Motley Fool' crew. I think 'azcynsun' sums it up ! 'Another article with direct intent to mislead investors and 'manipulate' the stock for personal gain right before earnings'. 10/10

    I understand many people lost a lot of money on this stock (including me) but you should look at the wider picture, it has many users who are beginning to buy options on their addictive games; it has an enormous user base; huge potential growth just around the corner with revenue generated through online gambling.

    Furthermore revenue is promising for a fairly new company; stock has shown a profit in (Q1 minus acquisition of OMG).

    As for your Motley Fools Caps survey- this is a joke and the result of manipulative repeated negative commentary on Zynga to those included in the research.

    The negative news is out unless it doesn't show a profit for Q2 but i think this unlikely. It also has no debts !

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Zynga CAPS Rating: *