Zynga’s Stock May Be Rising, But There Are Still Problems at Home

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Hiding behind gains of as much as 10 percent on Monday — stemming from the state of Nevada’s Friday decision to legalize online gambling within its borders, a move that will be critical to the long-term success of Zynga (NASDAQ:ZNGA) — the Internet gaming developer is still a beleaguered company.

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While many investors see online gambling as one of the few reasonable roads to prosperity left for Zynga, it will take some time to expand the inter-state regulatory framework necessary for operations to begin. In the meantime, the company’s business is still rapidly taking on water. In the 14 months since Zynga made its initial public offering, the online game developer has done just the opposite of gain momentum: games have been dropped, players have moved on, important executives have split, and shares have dropped from a high of $14.69 in early March of 2012 — four months after the IPO — to Monday’s closing price of $3.44.

Zynga pioneered the concept of social gaming. But, as The New York Times reported after the company released its fourth quarter earnings earlier this month, from its recent string of poor earnings reports, it could have been a case of “merely being in the right place at the right time, a condition also known as dumb luck.” The initial craze that surrounded the game provider’s initial offerings has worn off, and its earnings and revenues have felt the pressure of unpopularity…

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