Game developer Zynga Inc (NASDAQ:ZNGA) that has been
held over the past so many months as an overhyped stock that has failed to
deliver is suddenly seeing a reversal in its fortunes.
In early trades on Wednesday the stock was trading up
7.7 percent at $3.20, after having fallen as low as$2.66 in the past one year.
To refresh your memory, this is the company whose
share price, till yesterday, had lost as much as 70 percent of their value
since its IPO debut in December last year.
Analysts had virtually given up Zynga's business as
worthless and with nothing to look forward to in the future with its games on
Facebook seeing dwindling interest among users of the social network.
Get Complete Analysis on ZNGA Here
Now the stock, available at basement bargain prices is
being rediscovered. JMP Securities started coverage of the stock with a `market
outperform' rating and set a price target of $4.50 for the stock.
Is it just bargain hunting or is there more to it?
Bloomberg in a recent
analysis said that the only way investors can recoup their losses is
through a stake sale to a strategic investor who can infuse fresh funds and
bring in some optimism back.
On Tuesday the company was almost being dismissed as a
penny stock. In April Chief Executive Mark Pincus had sold about 15 percent of
his shares, in what was seen as an `unusual' move.
Pincus made a cool $198 million out of the transaction
and lost no time in buying a $12 million mansion in Pacific Heights with it,
according to the San Francisco Chronicle.
So Pincus may have substantially diminished the pain
of seeing the fall in the stock price that has substantially eroded the wealth
of the rest of the hapless investors.
Investors should probably take advantage of today's
rally and exit while they can.
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