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Zynga stock sinks after lowered 2012 outlook

Associated Press Modified: October 5, 2012 at 5:30 pm •  Published: October 5, 2012

NEW YORK (AP) — Troubled Zynga's stock traded near its lowest level ever Friday after the online game maker behind "FarmVille" forecast a third quarter loss amid weak demand for its Web-based games. It's also taking a hefty charge related to its March acquisition of mobile game company OMGPop.

Zynga Inc., also known for "Words With Friends" and "Mafia Wars," said late Thursday that it expects to post a loss for the third quarter, largely because of the $85 million to $95 million charge on the OMGPop purchase. It bought the company behind "Draw Something" for $183 million.

Baird analyst Colin Sebastian said Zynga's transition from Web-based Facebook games to mobile is "more painful than expected." He downgraded the company to "Neutral" from "Outperform" and cut his target price to $3 from $6.

"Despite our mis-timed upgrade earlier in the summer, it is clear that Zynga will not be able to counterbalance social gaming (challenges) this year with its success in mobile and its broader network buildout," the analyst wrote in a note to investors.

Zynga is trying to reduce its dependence on Facebook, where the bulk of its games are played, by focusing on mobile games and, its online game network.

Wedbush analyst Michael Pachter also cut his target price, to $4 from $7, but kept an "Outperform" rating on Zynga. He thinks the stock has a "significant" potential to trade higher, which is why he decided not to downgrade it following the disappointing outlook.

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