Mark Pincus may be sick and tired of life as CEO of a publicly traded company — and shares of his Zynga gamemaker haven’t even been floated yet.
Days before the San Francisco outfit’s initial public offering, one Wall Street firm yesterday advised investors to sell shares in Zynga.
The unusual pre-IPO report from Sterne Agee’s Arvind Bhatia puts a “sell” rating on Zynga shares with a price target of $7. The company is expected to price shares between $8.50 and $10 after the closing bell tomorrow before it starts trading on Friday.
“When you look under the hood, what you see is growth slowing significantly, margins under pressure, and free cash flow is diminishing,” Bhatia told The Post yesterday. “‘FarmVille’ by Zynga’s own admission has peaked. Its biggest game is not going to be a contributor to growth anymore.”
Also, revenue growth from bookings has been slowing, Bhatvia said, from 156 percent last year to 37 percent this year.
Zynga was estimated to be worth about $14 billion this summer, and the high end of the current share price range values the company at $7 billion.
Even that’s too high, according to Bhatia, who noted that Zynga was valued at $4.9 billion at the beginning of the year, when growth prospects looked better.
Still, others on Wall Street said Bhatia’s “underperform” rating was premature, since shares haven’t even started trading yet.
Michael Pachter of Wedbush Securities, who plans to initiate coverage after Zynga goes public, said that to assume Zynga won’t grow again is shortsighted.
Yesterday, Jive Software, which develops social networking infrastructure for enterprise customers, saw its shares jump from an opening price of $12 to $15.25, a 25 percent increase.