Zynga Just Slashed Guidance, And Now Analysts Are Slashing Facebook

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“While many of our games performed to plan, as a whole we did not execute to our satisfaction,” said Zynga CEO Mark Pincus in a statement Thursday.  The games maker significant reduced its guidance for bookings and earnings, and the stock is plunging in electronic trading. A healthy amount of Facebook’s revenue comes from Zynga’s games.  However, it’s unclear if it’s good or bad news for the social network. “Just over half of Facebook’s Payments & Other (P&O) revenue was related to Zynga products in 2Q2012,” wrote Morgan Stanley’s Scott Devitt in a note to clients.  “We are unsure whether Zynga’s reduced outlook is due to more-vigorous competition within social gaming that may benefit Facebook, or instead due to less interest in social gaming overall. We therefore prefer to take a more conservative approach and reduce our Facebook Payments & Other (P&O) revenue accordingly.” “This reduces our total revenue forecasts by 0.5% in 3Q2012, 2% in 4Q2012, and about 2% in FY2013-2015. On lower revenue, we reduce EPS estimates 0%-2% and now look for 2012/2013/2014/2015 EPS of $0.50/$0.79/$1.07/$1.40 versus $0.50/$0.81/$1.10/$1.43 previously.” Devitt is maintaining his buy rating on the stock, but he reduced his price target to $31 from $32.

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