Zynga shares fall for second consecutive day
But Michael Pachter expects social giant to outperform expectations
Zynga's share value dropped by a further 5 per cent on its second day of trading.
The company went public last week with shares priced at $10 each. That rose by 10 percent to $11 before plummeting to close the first day of trading at $9.50.
Yesterday, the shares continued to fall, closing the day at $9.04. At its lowest point the share price was $8.74 - around 13 per cent lower than the price set in the IPO.
These fluctuations reflect the performance of the NASDAQ, which was also down, but it also places Zynga in the company of other under-performing tech IPOs in 2011.
Shares in the online deals specialist Groupon were initially priced at $20 when the company went public on November 3, but an immediate rise to $28 had turned into a low of $15.24 by November 28. Groupon stock currently trades at $22 a share.
The online music firm Pandora has also struggled since its June IPO. From an initial price of $16, the company's share value rose to $20 by July 1, before tumbling to a low of $9.84 by September 12. At the close of trading yesterday, Pandora's shares cost $9.99 each.
However, Wedbush analyst Michael Pachter has given Zynga a 12-month share-price target of $12.50, and expects its revenue to increase to $1.53 billion in 2012.
"By virtually any metric, it is clear that Zynga is the dominant developer of social games, claiming six of the top ten most popular games on Facebook by DAUs," he said in a report issued yesterday.
"We believe that Zynga's dominance is its key strength as the company leverages its large installed base of players each time it launches a new game."
Wedbush identified expansion into the smartphone market as a key to Zynga's future growth, with the company growing its DAUs on mobile platforms to 9.9 million by September 30 2011 - around ten times its mobile DAUs on November 1 2010.
Zynga is also making a play for the Chinese market, inking a deal with the online portal Tencent to launch a fully localized version of CityVille in the region.
As of September 30 2011, only 35 per cent of the company's revenue was international, despite 80 per cent of Facebook users living outside of the US.
"We attribute the difference to the company's failure to localize many of its games in different languages," the report states.
"Its first several games were playable in only a handful of foreign languages, but recent releases have launched in 12 to 17 languages each, compared to Facebook's availability in over 50 languages."