Zynga has 900 million cash in the bank and just sold their headquaters. If they are not total idiots they should be able to keep the lights on and paying developers for a while. That's why I think their stock is a deal @2$/share.
Another scenario is that they get acquired by a different company. In this scenario it is also likely their share price would jump and I would cash out as well.
- Goodwill - 657,671,000
- Property, plant and equipment - 273,221,000
The 273 million in PP&E is interesting because that is essentially the purchase price on their headquarters building (or $340 per square foot). Office space in San Francisco is going for around $800 per square foot now.
Since investors know about that potential large gain, they are effectively saying two things:
1.) They do not trust that Zynga will ever deliver profits.
2.) They value goodwill at zero.
In a case like this, honestly, laying off people is one of the more palatable tools in their box. A round of layoffs would:
a.) Drop their annual operating loss (they lost about $45m in 2015 and if their headcount stays the same and they lease space in the building they currently own, they can expect that loss to rise in 2016.)
b.) Cut the amount of space that they need to lease.
c.) Streamline the company.
Of course, it could also:
a.) Kill morale.
b.) Encourage everyone left to dust off their resumes and stream for the exits while the job market in San Francisco stays strong.
Either way, Zynga is in a tough spot. Investors have ultimately valued the company at assets + zero and show little faith that the company will ever be profitable again. Layoffs are a tough thing and they often backfire, but strategically, they aren't unthinkable.
According to their most recent statement of cash flows (year ended Dec 31, 2015), they lost about $45m on operations last year. Since they're selling their building (and if there are no layoffs), I suspect that to increase to around $55m. That gives them a ton of runway...
My only concern is that their current $2.25 stock price gives them a market cap of a little less than $2.1b. That is quite interesting because their 2015 balance sheet shows total assets of just a little over $2.1b. The dubious number on their balance sheet is ~ $658m of goodwill, but I think that risk is possibly offset by only valuing their property, plant and equipment at ~ $273m.
Zynga may not have another hit left in them, but if they do, a $2.25 stock price leaves plenty of room for profit. It's definitely not a place to park your retirement money, but there are certainly worse stocks out there!
Wether or not that's a good bet is debatable considering their track record to date.
In my opinion, the problem with Zynga was the social games bubble, years ago I used to read on tech news websites that Zynga is really big to the point that Facebook own 25% of its revenue to Zynga, Facebook was just started monetizing their business. Sometimes you shouldn't "look big" as much as others expect you to be.