Why Amazon.com, Inc (AMZN) Drops and Zynga Inc (ZNGA) Soars


Amazon.com, Inc (NASDAQ:AMZN) declined significantly on Friday as investors were concerned about the weak guidance issued by the e-commerce giant for the current quarter.

The stock price of Amazon.com, Inc (NASDAQ:AMZN) dropped more than 11% to $358.69 per share on Friday. The stock previously closed at $4.03.01 per share.

Amazon issues lower guidance

The decline in the stock value of the e-commerce giant was primarily driven by its estimated potential losses this quarter. Amazon.com, Inc (NASDAQ:AMZN) projected that it might deliver operating results in the range of $200 million losses to $200 million profit.

Investors were also concerned about the spending habits of the e-commerce giant, which could offset potential revenue from its planned membership fee increase in Amazon Prime.

Yesterday, Amazon.com, Inc (NASDAQ:AMZN) indicated its plan to increase its Amazon Prime membership fee by $20 to $40 in the United States due to increasing fuel and transportation costs. Analysts estimated that the increase could generate additional $500 million to $1 billion revenue for the company.

Doug Anumth, analyst at JP Morgan opined that the e-commerce giant will likely re-invest some of its additional revenue from Amazon Prime. According to him,

JP Morgan analyst, Doug Anmuth commented, “While the increase in Prime pricing appears to be a positive for margin in the near term. We believe Amazon is likely to re-invest some of the additional shipping revenue to increase capacity.”

According to investment risk monitoring firm Smartstops.net, Amazon.com, Inc (NASDAQ:AMZN) entered the elevated risk level when its shares started trading around $384.30 per share. According to the firm, investors who pulled out their investment in the company at this level saved $22.80 per share.


Zynga benefited from NaturalMotion deal

On the other hand, the stock price of Zynga, Inc (NASDAQ:ZNGA) surprisingly skyrocketed 23% to $4.39 per despite reporting that its monthly active users declined from $298 million to 112 million in the fourth quarter, and it is eliminating 15% or 314 employees. Zynga, Inc (NASDAQ:ZNGA).

The online video gaming company also reported that its fourth revenue declined 43% to $176 million and it recorded a net loss of $25 million.

Investors ignored these negative figures and focused their attention on the transaction of Zynga, Inc (NASDAQ:ZNGA) to acquire NaturalMotion for $527 to boost its effort in developing games for mobile devices. The increase in the stock value of the company demonstrates that investors are confident in the current mobile monetization strategy of the online video gaming company under its new CEO Don Mattrick.

“NaturalMotion expands Zynga’s creative pipeline, accelerates our mobile growth, and brings next-generation technology and tools to Zynga that will fast-track our ability to deliver consumers more hit games,” according to the company.

According to Smarstop.net, Zynga, Inc (NASDAQ:AMZN) has a normal risk level.