Amid a broadly lower day in the market, social game maker Zynga (Nasdaq: ZNGA ) is bucking the trend and has seen its shares jump by as much as 9.7% today on the heels of some bullish analyst sentiments.
JMP Securities has initiated coverage on the company with a "market outperform" rating, accompanied by a $4.50 price target. This deserves some additional context though. While that target represents over 50% upside from yesterday's closing price of under $3 per share, and certainly a 50% gain would outperform the market, this seems to be a value-based rating since shares had lost about 70% of their value since the company went public at $10 last December.
It would seem that investors are now thinking Zynga looks awfully cheap, as its market cap was just $2.25 billion at yesterday's close. When you consider that Zynga has about $1.64 billion in cash and investments on the books, 73% of its market cap before today's rally, the case for Zynga being cheap is clear. Even if you factor in the $100 million in long-term debt and bring its net cash position down to $1.54 billion, the market's not giving Zynga's future much credit. At $4.50 per share, Zynga would be valued at $3.4 billion.
It's worth pointing out that of Zynga's cash position, just under $1 billion