Analysts' Views on Zynga Stock Differ Ahead of IPO

6:56 PM PST 12/14/2011 by Georg Szalai

While Sterne Agee has a "sell" rating on the social gaming firm, BTIG's Rich Greenfield sees "compelling upside over the coming year."

NEW YORK - Zynga shares are scheduled to price after the market close on Thursday and start trading on Friday.

But ahead of the social gaming firm's IPO, Wall Street analysts have expressed differing views on the stock's outlook.

Sterne Agee analyst Arvind Bhatia slapped a “sell” rating on Zynga shares and a price target of $7, the New York Post reported. That is below the expected pricing range of $8.50-$10.

“When you look under the hood, what you see is growth slowing significantly, margins under pressure, and free cash flow is diminishing,” Bhatia said. Plus, former flagship game FarmVille has peaked.

Meanwhile, BTIG analyst Rich Greenfield said in a report on Wednesday that investors should participate in the IPO of the company that makes games for Facebook, such as CityVille and Mafia Wars.
 
"We view social gaming and particularly Zynga’s social games in much the same way - they are a new “cure” for boredom, and unlike TV, social games can be played anywhere on the planet that you have Internet access, while TV requires you to be in your living room - although YouTube and TV Everywhere are changing that," Greenfield wrote. "Furthermore, whereas most people watch TV alone or with their family, Zynga connects you to friends and family."

Even if Zynga prices its IPO at the high end of its IPO range at $10, "we believe its shares offer compelling upside over the coming year," he added. "With a significant increase in the pace of game launches having just begun late in the fourth quarter 2011 and expected to continue into 2012, we believe our 2012 bookings forecast of $1.5 billion is achievable and could be conservative."
 

Email: Georg.Szalai@thr.com

Twitter: @georgszalai

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