Zynga IPO offers plenty of upside, analyst says
One 鈥淔ast Money鈥� analyst sounded positive on the highly anticipated聽Zynga IPO, citing the company鈥檚 potential for growth.
聽鈥淚t鈥檚 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,鈥� said Stephanie Chang, research analyst at Renaissance Capital.
聽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聽post-IPO share prices, calling the 鈥�Farmville鈥� developer 鈥渄istinguished鈥� from other game developers.
聽鈥淶ynga鈥檚 a completely different animal,鈥� she said.
聽Chang said Zynga鈥檚 margin profile was significantly more attractive than a lot of other online companies. She also pointed to the company鈥檚 exposure to an estimated 3 percent of Internet users, which gave it potential advertising potential of $1.5 billion.
聽鈥淭hat鈥檚 a source of growth they haven鈥檛 even tapped into yet,鈥� she said.
聽Chang鈥檚 position stood in contrast to a Sterne Agee analyst placing聽a "sell" rating on Zynga聽earlier this week.
聽Either way, Stephen Weiss wasn鈥檛 tempted.
聽鈥淚 think the issue with all these IPOs right now is that there鈥檚 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鈥檛 know,鈥� he said.
聽Weiss said it was difficult to know who planned to own the stock and who looked to flip it.
聽鈥淚鈥檓 not going to buy the stock,鈥� he said. 鈥淚 would wait until it trades down and finds a real shareholder base.鈥�
