Zynga, which makes some of the better-known games on Facebook, like FarmVille and CityVille, is seeking to raise $1 billion in a public offering later this week. If successful, it will be the largest IPO from a U.S. Internet company since Google raised $1.7 billion in 2004.

But not everyone is buying the company’s growth story.

Sterne Agee analyst Arvind Bhatia said the bottom line is that the company’s hyper-growth is not sustainable, and that new titles, like CastleVille and Mafia Wars 2, are not tracking as well as such classics as FarmVille, or even CityVille.

That’s in steep contrast to bold claims made by Zynga as recently as last week that it will be able to double the number of paying customers it currently has.

But Bhatia argued that Zynga remains too dependent on Facebook despite efforts to diversify to mobile and to build its own game network.

Bhatia used a couple of pretty charts to help make his case. He tracked bookings over several periods to see how revenues were trending. Bookings can be a more accurate picture of the company’s current performance, rather than revenues, which may account for virtual goods sold over several quarters.

Bhatia’s report throws cold water on a couple of positive stories that emerged over the past couple of days pointing out that Zynga is currently dominating the social games charts, with its titles now holding all of the top five spots.

According to AppData, the top games are: CityVille, CastleVille, FarmVille, Zynga Poker and Words With Friends. Electronic Arts’ The Sims Social ranks No. 6.

Unfortunately, the daily rankings can be easily influenced. If a company has the budget, it can push titles to the top through the use of marketing campaigns. It may not be sustainable, but for a short period of time, it’s conceivable. Although, to be clear, there’s no way to tell if Zynga has increased its marketing in its run-up to an IPO.

The question remains whether Zynga will be able to achieve its goal of selling 100 million shares at $8.50 to $10 apiece.

Bhatia, who doesn’t own any shares and doesn’t do any investment banking work for the company, says a more appropriate price target is probably $7 a share.

Why?

After the vicious beating the market has given Palm (PALM) these past few months, the company’s stock–down a gruesome 75 percent since October–already well reflects its woes and the challenges it faces. And it’s still conceivable that the company may end up an acquisition target. So there’s that as well.

“We continue to view Palm as one of the share losers in the high-growth Smartphone segment,” Long wrote. “In our view, the company is too small to compete and the internally developed WebOS operating system is no longer a major differentiator. The end game for Palm is most likely to combine with a large OEM that wants to own its operating system and can leverage its brand and distribution platform.”

FURTHER READING:

• Good Luck Competing on the iPhone’s Home Turf, Palm
• Exercise in Futility? Palm Pre Plus, Pixi Plus Headed to AT&T
• Palm: Pssst. Wanna Buy 1.15 Million Smartphones?
• Palm Pileup: Weak Smartphone Sales and a Gruesome Q4 Forecast
• Could Be Worse, Could Be Raining: Palm’s AT&T Launch Delayed?
• Could WebOS Licensing Be Palm’s Salvation?
• Palm’s Salvation? Less Push, More Pull.
• And if Palm’s Project JumpStart Doesn’t Work Out, There’s Always “Project Defibrillator”
• Double Face-Palm: Analysts React to Palm’s Lowered Guidance
• Time to Start Looking for a Buyer, Palm?
• 2010: Year of the Palm? Maybe Not…
• Analyst: Palm May Be Acquired in the Next Two Years

Appalling. At $11.51, Yahoo’s (YHOO) stock price at this very moment, the company is trading at well below replacement value. “Spend $15 billion, and you could not build a new Yahoo today–not one with this global reach and brand,” Henry Blodget notes over at Silicon Alley Insider. “Wringing compelling upside out of the stock at $12 is not rocket science. At this price, it’s not even basic arithmetic. So we say again: Yahoo at $12 is ridiculous.”

Ridiculous, indeed. Perhaps the government will come along and offer Yahoo a nice $31-per-share bailout–you know, just to bolster investor confidence.