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Stupidity is contagious. It gets us all from time to time. Even respectable companies can catch it. As I do every week, let's take a look at five dumb financial events this week that may make your head spin.
1. Zynga needs a new game face
Social gaming is a popularity contest, and Zynga (NASDAQ: ZNGA ) isn't winning.
Shares of the top dog in social gaming slipped 7% on Thursday after delivering dreadful guidance.
The most recent quarter itself wasn't all that inspiring with an 18% decline in revenue. Zynga surprised the market with a small profit -- analysts were bracing for a deficit -- but the real problem is that bookings continue to shrink.
Zynga sees $225 million to $235 million in revenue for the current quarter, and that's well below the $263.6 million it just rang up, the $301.6 million it delivered a year earlier and the $261.7 million that Wall Street was settling for this time around.
Weren't new games and the new real money gambling initiative overseas supposed to turn things around? This game isn't getting any prettier.
A prankster posted a bogus press release on a website that offers free submissions, claiming that Baidu would be buying Zynga for $10 a share.
It may not be a totally outlandish idea for Baidu to snap up Zynga as a way to bone up on both mobile and have some more skin internationally, but did anyone really believe this? Some people did because Zynga's stock initially moved higher on the fake news.
Why would any company pay three times what Zynga's worth in a buyout? Since Zynga is trading close to its cash value, a buyout at its IPO price of $10 would actually be a lot more than three times its current valuation on an enterprise value basis.
3. House dressing
There are a few indications that we're in a housing bubble again, but at least one homebuilder is already falling back to Earth.
NVR (NYSE: NVR ) posted strong financials but fell woefully short of expectations.
The residential property developer's revenue climbed 28% to $770.3 million and earnings rose 75% to $6.84 a share. This may look snazzy, but Wall Street was betting on a profit of $8.05 a share on $840.9 million in revenue.
It also has to be problematic to see the order cancellation rate of 13.2%. That's quite a bit higher than the 10.3% rate during the prior year's quarter.
4. Apples attract worms
Apple (NASDAQ: AAPL ) managed to surpass watered-down expectations for its latest quarter, but then it pulled the rug from investors with brutally disappointing guidance.
As if the lack of new product announcements in recent months wasn't bad enough, now investors are knee-deep in a quarter of flat top-line growth with a sharp decline in profitability.
Apple posted its first year-over-year decline in profitability since 2003 this week, but the current quarter is even scarier.
The faltering consumer tech giant is eyeing $33.5 billion to $35.5 billion in revenue for the new fiscal third quarter, implying a small dip on the top line at the midpoint. The real horror show here is how contracting margins are eroding earnings growth. Apple's margin and revenue guidance implies that earnings will be in the ballpark of $7 a share, embarrassingly short of both the $9.08 a share Wall Street thought it would crank out and the $9.32-a-share profit it served up a year earlier.
5. Frank LINN
LINN Energy (NASDAQ: LINE ) didn't get the job done this quarter.
Revenue and earnings fell short of Wall Street expectations for the independent oil and natural gas developer. LINN's adjusted earnings of $0.16 a share were well shy of the $0.24 a share that analysts were targeting.
LINN also fell short of its production guidance. Weather issues caused shut-ins and drilling delays, leading to a daily average of just 796 million cubic feet, below its original production target of 810 million to 845 million cubic feet.
You may have followed some losers this week, but there's always time to get it right the next time.
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