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Sterne Agee’s Arvind Bhatia said the issue came down to valuation _ what people are willing to pay.

“You might like a company but not its valuation,” said Bhatia, who took the unusual step of starting coverage of Zynga’s stock before it went public, giving it an “Underperform” rating and a price target of $7.

With its huge player base and a few loyal spenders, Zynga had net income of $90.6 million in 2010, an unusual pre-IPO money-maker in the sector.

Cowen & Co. analyst Doug Creutz, however, initiated coverage Friday with a “Neutral” rating on the stock. Although Zynga is the leader in Facebook gaming, he’s concerned that it won’t be able to grow fast enough to justify its stock price. Growth in Facebook gaming has slowed, and Zynga’s market share has declined from 50 percent to 38 percent of daily active users, he wrote.

He’s also concerned that Zynga’s famously aggressive and hard-charging culture may not be the best field to grow good games in. Others have raised concerns that the focus on deadlines and profits might be squeezing out creativity and talent.

In November, Groupon raised $700 million in its IPO. The granddaddy of all Internet IPOs might happen next year, as Facebook Inc. is expected to raise as much as $10 billion.

Bhatia declined to speculate about what Zynga’s first-day drop might mean for Facebook. But he pointed out that what was a bad year for Zynga was a good year for Facebook. That’s because Facebook stated charging application developers a 30 percent cut of the money they make through its site. That means for every dollar a player spends on “FarmVille” crops, 30 cents goes to Facebook.

“They are in the driver’s seat,” Bhatia said of Facebook. The company, he added, is “in class of its own.”

DreamWorks CEO Jeffrey Katzenberg, who sits on Zynga’s board, said Zynga and Facebook have both benefited by working together.

“As important as Facebook is to Zynga, Zynga is to Facebook,” he said in an interview. “I have seen very good rapport with the two Marks and I would expect that relationship to continue to grow.”


AP Technology Writer Peter Svensson contributed to this report.