Zynga IPO offers plenty of upside, analyst says

Zynga IPO is priced at $10 a share, making the Internet social gaming company worth $7 billion. The Zynga IPO is scheduled for Friday.

Jeff Chiu/AP/File
In this October file photo, Zynga CEO Mark Pincus speaks at a Zynga event in San Francisco. Founded in 2007 and named after Mr. Pincus’s dog, the social game company follows online deals site Groupon Inc. and professional network LinkedIn Corp. in going public. The Zynga IPO is scheduled for Dec. 16, 2011.

One “Fast Money” analyst sounded positive on the highly anticipated Zynga IPO, citing the company’s potential for growth.

 “It’s currently the leader in the social gaming space. It has 54 million daily active users, which is more than the next 14 game developers combined,” said Stephanie Chang, research analyst at Renaissance Capital.

 Zynga, which priced shares at $10, will hold its initial public offering Friday under the symbol ZYNG. The initial share price will give the company a valuation of $7 billion.

Chang said Zynga would be able to avoid the trend of Internet and social media companies seeing a drop in their post-IPO share prices, calling the “Farmville” developer “distinguished” from other game developers.

 “Zynga’s a completely different animal,” she said.

 Chang said Zynga’s margin profile was significantly more attractive than a lot of other online companies. She also pointed to the company’s exposure to an estimated 3 percent of Internet users, which gave it potential advertising potential of $1.5 billion.

 “That’s a source of growth they haven’t even tapped into yet,” she said.

 Chang’s position stood in contrast to a Sterne Agee analyst placing a "sell" rating on Zynga earlier this week.

 Either way, Stephen Weiss wasn’t tempted.

 “I think the issue with all these IPOs right now is that there’s no investor loyalty, so the market gets a little rough and the first stocks that go are the ones they just bought, they really don’t know,” he said.

 Weiss said it was difficult to know who planned to own the stock and who looked to flip it.

 “I’m not going to buy the stock,” he said. “I would wait until it trades down and finds a real shareholder base.”

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