Zynga Lays Off 18%

Yesterday, Zynga ($ZNGA) announced that it’s laying off 520 employees which is 18% of its workforce. I honestly feel terrible about about these types of stories; my first thoughts are with the people who are now out of work. But as an experienced investor, I’m afraid to say that I’m not surprised.

Zynga is reiterating its outlook for this year:

The company reaffirmed its revenue and earnings per share guidance for both the current quarter and the full year. But Zynga now expects a net loss of between $28.5 million and $39 million during the current quarter, worse than the $27.6 million loss analysts surveyed by Thomson Reuters had been expecting.

I get frustrated when I see so many investors taken in by companies with little operating histories. Zynga went public 18 months ago and the IPO was a flop. Still, the shares off got close to $16. That’s simply crazy. The company was never worth half that much.

A good rule for investors is to ignore all money-losing companies. A stock has to demonstrate to me that it can consistently earn a profit. Put it this way: Wall Street’s outlook for Zynga for 2014 is for earnings of $0.00. That’s right — nothing. I’m pretty sure Bed Bath & Beyond ($BBBY) will make more than nothing next year.

Just stay away from the money losers.

Posted by on June 4th, 2013 at 10:39 am

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