Analyst Sterne Agee's Arvind Bhatia has given Zynga an "Underperform" rating ahead of its imminent IPO.
"We are initiating coverage with an Underperform rating," said Bhatia.
"While we believe in the potential for social games, we think Zynga's growth is slowing even faster than what is 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."
He also set a $7 price on shares, compared to the expected $8.50 to $10, and pointed to issues with Facebook dependence, and falling player numbers.
"Cityville, currently Zynga's best title in terms of traffic, is tracking, by our estimates, 50% below Farmville at the same point in its history."
"Castleville is averaging DAUs 50% below Cityville at the same point. The picture with Mafia Wars 2 appears quite dismal with DAUs having already declined to less than 1 million from 28 million reached 2 weeks after launch."
"This also implies, perhaps, that sequels in social gaming are not a guaranteed success. Zynga Poker, the company's oldest title, seems relatively stable but is also past its peak."
The rating was backed up by a smilar $6 share value from Morningstar senior equity analyst Rick Summer.
"Zynga is one of the best positioned companies in the market for social gaming outside of Asia," he stated.
"We laud its Facebook platform dominance and its strong suite of social games, though we question Zynga's ability to sustain bookings growth, particularly as gamers increasingly engage with smartphones and tablets, where the firm has been less successful."