Zynga Inc (ZNGA)

[august1991]

Check out this week's Danger Zone interview with Chuck Jaffe of Money Life and MarketWatch.com.


Zynga (ZNGA) is in the Danger Zone this week. The stock has been beat up since its much-hyped IPO in 2011, but even after losing 61% of its value the stock is still too expensive. ZNGA is competing in an immature market where the barriers to entry are almost nonexistent and brand loyalty is a foreign concept. In addition, the company is bleeding cash and has hidden liabilities on its balance sheet. Investors have celebrated new CEO Don Mattrick from Microsoft (MSFT), but he will have to be quite the miracle maker to justify the celebration.

Weak Competitive Position

Most of the optimism for ZNGA came from the fact that it was a large player in a growing industry. The problem with the social and mobile