Zynga Officially Goes Public, Analyst Raises 'Significant Concerns'

As Farmville creator Zynga goes public today, analyst group Cowen and Company has initiated coverage of the company with a 'Neutral' rating. San Francisco-based Zynga raised $1 billion with an initial public offering priced at $10 per share. It's the largest IPO from a U.S. internet company since Google went public in 2004 and raised $1.4 billion. Zynga's valuation is $7 billion. While investors were apparently enthusiastic about the IPO, snapping up shares on the high-end of the expected range, analysts continue to express concern about the future of Zynga, as the company sails uncharted waters. In a research note Friday, Cowen analyst Doug Creutz explained that, while Zynga has positioned itself well as the leading company in the Facebook gaming space, he has "significant concerns" regarding whether the company will be able to maintain its growth and justify the current valuation. He noted that the company's Facebook DAUs count has slowed "dramatically" in recent months, and its share of the overall Facebook gaming DAUs count has dropped from 50 percent to 38 percent over the last year. Elsewhere in the Cowen report, Creutz explains that Zynga's expenses have "exploded" over the last year, while its growth has decelerated dramatically in comparison. He also believes that "Zynga's culture may not be congruent with creativity," and that this may well impede the company's growth next year. Earlier this week, analyst group Sterne Agee initiated its coverage of the company with an "Underperform" rating, noting that "Zynga's growth is slowing even faster than what is obvious at first."