Zynga Running Out Of Steam

An analyst's assessment that this social gaming company doesn't need on the run up to an IPO. Execs at social gaming giant Zynga are having an up-and-down week as the company moves closer to its much-anticipated IPO.

AppData reported Tuesday that the millions of players daily on the company's Farmville, Cityville and Poker offerings on Facebook have pushed Zynga to the top of the Daily Average Users leader board on the world's biggest social networking website. However, business analysts warned that the company could be slowing down – hardly the sort of assessment Zynga needs as it approaches its public listing.

The negative news was carried by CNBC, which reported that analysts Sterne Agee had issued a ‘sell' opinion on Zynga before the company has even been listed, justifying its opinion by writing:

“Farmville, the company’s flagship title which helped generate hyper-growth in the past, has peaked and the other titles are coming on line at a much slower pace.

“While we believe in the potential for social games, we think Zynga’s growth is slowing even faster than was obvious at first. Its margins are under pressure, and free cash flow has been declining recently; thus we believe the implied valuation in the IPO is not justified.”

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