Facebook Shares Decline as Zynga’s Profit Misses Estimates
Facebook Inc. (FB) shares dropped in extended trading after Zynga (ZNGA) Inc., the biggest provider of games on the social network, reported second-quarter profit that missed analysts’ estimates and sliced forecasts for the year.
Facebook, which will issue its first earnings report as a publicly traded company tomorrow, fell as much as 9.7 percent to $26.50. It had gained 3.1 percent to $29.34 at the close in New York. Zynga, which slid as much as 42 percent in late trading, posted profit before some items of 1 cent a share, missing the 6-cent average of analysts’ estimates compiled by Bloomberg.
In the first quarter, Facebook estimated it derived as much as 15 percent of its revenue from Zynga, which makes games such as “FarmVille” and “CityVille.” That included Facebook’s cut of payments that members use to buy virtual goods on Zynga’s games, as well as advertising.
“Zynga reduced its growth outlook significantly,” said Jordan Rohan, an analyst at Stifel Nicolaus & Co., who has a buy rating on Zynga and a hold on Facebook. “Most likely, Facebook’s games revenue may disappoint investors.”
Zynga lowered its full-year 2012 forecast for bookings, or the total value of virtual goods sold, to $1.15 billion to $1.23 billion, compared with an April projection of $1.43 billion to $1.5 billion. Zynga also said it expects 2012 earnings, excluding some items, of 4 cents to 9 cents a share, compared with a prior projection for 23 cents to 29 cents.
The social-gaming company cited a “more challenging environment” on the Facebook site in its statement announcing earnings. Zynga rose 3.3 percent in regular trading today to $5.08 before the earnings report.
Facebook, based in Menlo Park, California, will report second-quarter profit, before certain items, of 11 cents a share on sales of $1.16 billion, according to the average of analysts’ estimates compiled by Bloomberg.
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