Zynga Inc's financial performance is unlikely to improve anytime soon, analysts said, after changes to Facebook Inc's
Zynga shares plunged 37 percent to $3.20 in premarket trade on Thursday, after the game provider slashed its 2012 outlook and reported quarterly results that fell far short of Wall Street targets.
J.P.Morgan Securities and Citi Investment Research downgraded the stock to "neutral" from their top ratings and at least five other brokerages slashed their price targets on the stock to as low as $3.00.
Zynga's performance hit
"The biggest factor impacting current performance appears to be the way Facebook is surfacing gaming content on its platform," JP Morgan's Doug Anmuth wrote in a note to clients.
"Given what we believe could be multi-quarter impact from Facebook and lack of near-term operational catalysts, we're downgrading Zynga shares," Anmuth added.
Surfacing refers to how a website showcases content.
Zynga relies on the Facebook for more than 90 percent of its revenue, but a steep drop in players for its core Facebook money-making games prompted the company to slash its 2012 earnings estimates.
Zynga expects 2012 earnings to be between 4 cents and 9 cents a share, down from its prior view of 23 cents to 29 cents a share.
"As Zynga looks to grow its footprint in the mobile category, the traditional Facebook business was expected to act as a solid foundation, but is instead showing incremental weakness," said Piper Jaffray analysts.
FarmVille, which represented 29 percent of Zynga's second-quarter revenues, has shrunk to just 20 million users this month from a high of about 80 million in March, according to Appdata.com, a Facebook tracking service.
Barclays Capital axed its price target on the stock to $3 from $8, while Piper Jaffray and Citi now have a target of $4.
BMO Capital Markets halved its target on the stock to $5, while Robert W. Baird and Canaccord Genuity lowered their price target to $6 from $13.
Zynga shares, which have dropped 60 percent since their market debut in February, closed at $3.20 on Wednesday on the Nasdaq.