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Zynga has an awful looking chart, an upcoming report expected to post a loss, and a dependency on Facebook that makes meth addicts appear stable and in control. (Zynga.com)
Zynga has an awful looking chart, an upcoming report expected to post a loss, and a dependency on Facebook that makes meth addicts appear stable and in control. (Zynga.com)

Week ahead

From Zynga to Monsanto, 4 earnings reports to watch Add to ...

  • 52-Week Range: $3.03 to $10.05

Investors aren’t expecting an improvement in earnings this time at bat. Analysts forecast per share results below last year in the same quarter. A loss of 18 cents is expected after the market closes on Wednesday. During the matching period in the previous year, OCZ lost “only” 14 cents per share.

I want to say that a surprise beat will explosively send shares higher; while true, I don’t have a high level of confidence it will happen. If OCZ is able to at least meet estimates it will be a victory. Look for, or at least be prepared for, a miss.

Last quarter OCZ’s earnings were released on July 10 and the previous closing price was $5.45. Relative to a current price of $3.40, shares are down 37.6 per cent.

Five out of eight analysts rate OCZ a hold, two recommend this as a buy and one recommends selling. The average analyst target price for OCZ is $6.05.

There is no other way to describe the chart pattern than train wreck. After trading oversold in late May, OCZ bounced back to briefly (three days) test the 200-day moving average. Needless to say, OCZ didn’t receive a passing grade.

In the last month, the stock has really taken a turn for the worse. Shares have crumbled 39.7 per cent in the last month of trading.

Last quarter OCZ’s earnings were released on July 10, and the previous closing price was $5.45. Relative to a current price of $3.40, shares are down 37.6 per cent.

The short interest says a lot. I know I write it a lot, but it needs to be repeated: Short-sellers are regarded as the smart money. The short interest is altitudinous and is a strong warning that short-sellers expect the share price to fall considerably. The short interest is 41.4 per cent. When a stock is under $5, and the shorts are still not letting go, it’s like a robot yelling “danger Will Robinson, danger.”

Zynga

Background: Zynga is the world’s largest social game developer. Games include CityVille, FarmVille and many others on which I receive daily requests to join in. Zynga games are available on a number of global platforms including Facebook, MySpace , Yahoo!, the iPad, the iPhone and Android devices. Zynga trades an average of 18 million shares per day with a market cap of $2-billion.

  • 52-Week Range: $2.66 to $15.91
  • Price To Book: 1.11

Wall Street isn’t expecting much this quarter (not a surprise for one of the worst performers this year). The third-quarter earnings release is scheduled for Monday. The consensus estimate is currently a loss of 6 cents a share, and there isn’t a corresponding period last year.

Last quarter ZNGA’s earnings were released on July 25, and the previous closing price was $5.08. Relative to a current price of $2.84, shares are down 44.1 per cent.

Fifteen out of 20 analysts rate Zynga a hold. Only four recommend a buy and one recommends selling. The average analyst target price is $4.89.

From a technical perspective, the chart for Zynga looks like an Aspen ski slope with the top of the hill on the left side. Over the last month in trading the stock has dropped about 8.4 per cent.

Zynga has an awful looking chart, an upcoming report expected to post a loss, and a dependency on Facebook that makes meth addicts appear stable and in control. Still, there is something very wrong with this picture. Not all the dots connect, and maybe it’s a result of a lack of long-term history. However, Zynga has found technical support.

It’s almost too obvious Zynga will continue to fall, except the short interest based on the float is still rather small at only 4.4 per cent. Zynga may not beat in the upcoming report so focus on the guidance and ignore the previous results. If they don’t guide into the abyss, consider the earnings a strong indication shares will trend higher. A price under $3 a share will likely appear as a bargain price.

Also, keep an eye on the options. Options are pricing in a large move the odds favour a move higher.

I use Zacks.com , WSJ.com , Tradestation and Reuters for my data. PE is generally adjusted PE based on an average number of shares.

This article was written by an independent contributor, separate from TheStree t’s regular news coverage.

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