Zynga Falls 15% After Company's First Public Earnings Report

Shares of Zynga ZNGA are getting smoked on Wednesday after the company's first ever earnings release as a public company. On Tuesday, after the closing bell, the online game developer reported a Q4 GAAP loss of $435.01 million or $1.22, versus a profit of $16.06 million or $0.05 per share, in the year ago period. On a non-GAAP basis, which is comparable to analysts' consensus, ZNGA reported EPS of $0.05 versus $0.09 in last year's corresponding quarter. This compared to Wall Street consensus EPS estimates of $0.03. Revenues for the fourth quarter were $311.24 million compared to $195.76 million last year. Bookings were up to $306.5 million for Q4, which was a 26% year over year increase. Heading into the report, analysts had consensus revenue estimates of $302 million. Looking ahead, ZNGA sees non-GAAP earnings per share between $0.24 to $0.28 in fiscal 2012. At last check, ZNGA shares had lost roughly 15% to $12.19 on Wednesday. While the company's numbers were better than Street consensus, the stock is being pressured for a number of reasons. First, the shares were downgraded by at least three brokerages this morning which has led to profit taking in the name. The stock is up 37% over the last month, largely on hype related to Facebook's much anticipated IPO. Zynga's games are the largest revenue driver for Facebook. Investors are also worried about the stock's valuation in light of its recent run-up and a deceleration in the company's bookings - the metric that Zynga uses to measure cash it gets upfront when people buy the company's virtual game items. While some analysts are taking a cautious tone in light of Tuesday's earnings results, and investors are pushing down the shares on heavy volume, the move is primarily due to the fact that ZNGA had become overheated in recent weeks. Due to a small float and its recent IPO status - ZNGA has only been a public company since last December - this stock is very volatile. ZNGA also has a very large short interest (21.31%), which exacerbates its volatility. Long-term investors looking to build a position may want to steer clear of ZNGA for now and look to accumulate shares on a pullback to the 50-day moving average which is all the way down at $10.33.