Wednesday, July 25, 2012

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
Gameloft

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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