It’s a tale of two stocks: Netflix flying 13.8 percent higher Monday while Zynga plummeted 9.2 percent. So what drove the big moves?
Netflix shares ended 13.8 percent higher on comments from both CEO Reed Hastings and hedge fund manager Whitney Tilson, who did a 180 on the stock last fall after very publicly shorting it.
The good news: Hastings said the company began adding U.S. subscribers last quarter, consistent with last month’s guidance. Hastings made these public comments as Netflix launched in the UK and Ireland today.
The bad news: Hastings wouldn’t comment on whether Netflix could turn profitable this year. As the company stressed repeatedly last quarter—the cost of international expansion is expected to give Netflix a loss in 2012.
Tilson thinks that international expansion is very much worth the cost—saying “there’s an international growth story that nobody paid much attention to.”
But Tilson is even more bullish about US growth prospects, saying there’s no reason why Netflix won’t grow at the same 30% to 40% rate of the rest of the streaming video industry. And if it does hit that growth rate, Tilson says “the stock should go crazy to the upside.”
So what happened to Zynga Monday while the Nasdaq ended the day in the green? Blame it on ongoing fears about Zygna’s lack of diversification and disappointment over a soft launch for its first post-IPO game. On Friday Macquarie Research initiated coverage with a “Neutral” rating on concerns that just 2.2% of Zynga’s users—about 3.4 million players, actually pay the company.
On Wednesday Zynga launched “Hidden Chronicles,” to disappointment that it hasn’t become an insta-hit and criticism that it looks an awful lot like the most popular Facebook game last year, “Gardens of Time,” from Disney’s Playdom social gaming division. "Hidden Chronicles" hasn’t shown up as a hit yet on AppData, but Wedbush analyst Michael Pachter says that’s not such a big deal. Pachter says that Zynga isn’t promoting the game yet because they’re ironing out all the bugs. He’s still bullish on the stock and says he expects it’s already drawn a solid core audience and will expand more once Zynga starts soliciting players of its other games.
In other Zynga news, Morgan Stanley, one its IPO underwriters, announced a 16 percent stake in the company after the market close Friday. The bank bought those shares at the company’s $10 IPO price. Zynga has never closed above that IPO price and is now down about 20 percent from there. Zynga’s stock lock up expires on January 25 — we’ll see if Morgan Stanley holds onto those shares or goes running for the door.
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