Stupidity is contagious. It gets us all from time to time. Even respectable companies can catch it. As I do every week, let’s take a look at five dumb financial events this week that may make your head spin.
1. Zynga Inc (NASDAQ:ZNGA) needs a new game face
Social gaming is a popularity contest, and Zynga Inc (NASDAQ:ZNGA) isn’t winning.
Shares of the top dog in social gaming slipped 7% on Thursday after delivering dreadful guidance.
The most recent quarter itself wasn’t all that inspiring with an 18% decline in revenue. Zynga Inc (NASDAQ:ZNGA) surprised the market with a small profit — analysts were bracing for a deficit — but the real problem is that bookings continue to shrink.
Zynga Inc (NASDAQ:ZNGA) sees $225 million to $235 million in revenue for the current quarter, and that’s well below the $263.6 million it just rang up, the $301.6 million it delivered a year earlier and the $261.7 million that Wall Street was settling for this time around.
Weren’t new games and the new real money gambling initiative overseas supposed to turn things around? This game isn’t getting any prettier.
2. Baidu.com, Inc. (NASDAQ:BIDU) and Zynga sitting in a tree, M-I-S-S-I-N-G
Baidu.com, Inc. (NASDAQ:BIDU) also fell after disappointing investors with its quarterly report this week, but we’re not going there here.
A prankster posted a bogus press release on a website that offers free submissions, claiming that Baidu.com, Inc. (NASDAQ:BIDU) would be buying Zynga Inc (NASDAQ:ZNGA) for $10 a share.
It may not be a totally outlandish idea for Baidu.com, Inc. (NASDAQ:BIDU) to snap up Zynga Inc (NASDAQ:ZNGA) as a way to bone up on both mobile and have some more skin internationally, but did anyone really believe this? Some people did because Zynga’s stock initially moved higher on the fake news.
Why would any company pay three times what Zynga’s worth in a buyout? Since Zynga is trading close to its cash value, a buyout at its IPO price of $10 would actually be a lot more than three times its current valuation on an enterprise value basis.
3. House dressing
There are a few indications that we’re in a housing bubble again, but at least one homebuilder is already falling back to Earth.
NVR, Inc. (NYSE:NVR) posted strong financials but fell woefully short of expectations.
The residential property developer’s revenue climbed 28% to $770.3 million and earnings rose 75% to $6.84 a share. This may look snazzy, but Wall Street was betting on a profit of $8.05 a share on $840.9 million in revenue.
It also has to be problematic to see the order cancellation rate of 13.2%. That’s quite a bit higher than the 10.3% rate during the prior year’s quarter.