Zynga Could Spell Doom for Facebook (FB) Earnings

If an unprofitable small-cap stock falls 40% on a Thursday, does anyone notice? If you’re a Facebook (Nasdaq: FB) investor waiting on the company’s first earnings call since going public, the answer is yes.

Facebook unveils its second-quarter earnings in just a few hours, and the stock is already plummeting thanks to a dismal earnings report by game maker Zynga (Nasdaq: ZNGA).

Zynga shares are getting pummeled today after the company’s earnings, revenue and outlook all fell well short of consensus analyst projections. The stock has fallen nearly 40% today to a new all-time low of $3.09 per share. The previous low was $4.45 per share.

How does that relate to Facebook shares? Because Zynga does the majority of its business through Facebook.

Many of Zynga’s popular computer games – FarmVille, Words with Friends, Zynga Poker – are available on Facebook. That’s how most users access the games.

As such, Zynga is a major source of revenue for the social network. In fact, Zynga was responsible for more than 10% of Facebook’s 2011 revenue and roughly 15% of its Q1 2012 revenue.

So the fact that Zynga tanked last quarter doesn’t bode well for Facebook’s earnings outlook. And investors are already preemptively punishing the stock.

Facebook shares have fallen close to 7% today to fall below $28 per share for the first time in more than a month.

Should its earnings fall short of the 12-cents-a-share and $1.1 billion in revenue Wall Street is calling for, today’s decline may only be the beginning of an extended pullback.

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