Zynga Inc (ZNGA) and Groupon Inc (GRPN): Have the Bottoms Set In?

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Zynga Inc (NASDAQ:ZNGA) encountered a similar dramatic drop in share price, hitting a low of around $2.08 in November of 2012, a drop of over 79% from its IPO price. Shares have rebounded a bit, having hit $4 in mid-March. The price is trading around $2.85 recently.

Zynga recently announced that it laid off 18% of its workforce and closed numerous offices. The share price dropped over 12% in one trading day after the announcement. A portion of the Zynga stock price rise in the last 6 months was likely attributable to the hype surrounding real money gaming offered in the UK. New Jersey and Nevada recently legalized real money on-line poker, and may be followed by other states. Many believed that Zynga Inc (NASDAQ:ZNGA) would be well-positioned to take advantage of the real money market in the United Stated, due to its popular slot and poker mobile games. While Zynga has applied for a license to offer on-line gambling in Nevada, it is still facing a number of regulatory hurdles. Thus, real-money gaming may not be a reality for Zynga in the near-term future. The combination of the stock chart showing weakness, with the recent negative news, is indicative of the continued issues which plague the Company now. Investors may do well to wait until the ship has righted itself at Zynga Inc (NASDAQ:ZNGA).

Both Zynga and Groupon are facing some serious hurdles to reach their IPO debut prices. It is at least possible that both of them could be acquisition targets due to their loss in share value. Groupon Inc (NASDAQ:GRPN) has a market cap of $4.5 billion, while Zynga has a market cap of $3.23 billion. Any acquisition, or news of an acquisition, could send the share prices of both companies up. Yet, it is unclear who would acquire either entity at this point. As such, the future remains clouded for both companies.

Mike Thiessen has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

The article Zynga and Groupon: Have the Bottoms Set In? originally appeared on Fool.com.

Mike is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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