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As a dyed-in-the-wool value investor, I never thought I'd be recommending a social media stock, but mobile gaming leader Zynga (NASDAQ:ZNGA) has gotten too cheap to ignore. With a forward P/E ratio around 16, it is now trading well under fellow social stocks like LinkedIn (NYSE:LNKD) and Facebook (NASDAQ:FB), which trade at astronomical forward P/E ratios of 86 and 48, respectively.

Zynga's balance sheet is impressive as well, with over a billion dollars, or about 25% of their market cap, in cash even after the recent $183 million purchase of OMGPOP, maker of the popular Draw Something game. This further bolsters their expansive gaming portfolio, which includes many of the most popular game apps on both Apple and Android mobile devices as well as Facebook, and also showcases their growth potential through acquisition and innovation, as they are eyeing a Draw Something inspired game show collaboration with CBS that could easily become a hit or at least a catalyst to reignite interest in the game.

However, potentially much more lucrative is the opportunity for Zynga to position themselves as the leader in online poker. Their free poker game is showing continued popularity despite the current moratorium on real money online gambling. Coupled with the demise of many of the previous leaders in paid online poker, from the rampant cheating engineered at UltimateBet by former WSOP champ Russ Hamilton to the possible Ponzi scheme at Full Tilt Poker under the supervision (or lack thereof) of directors and notable professional poker players Chris "Jesus" Ferguson and Howard "The Professor" Lederer, Zynga could come to dominate this field just in time to enjoy the windfall that legalization would bring.

If fact, Zynga is fully embracing this potential field, with CEO Mark Pincus touting the possibilities with gambling games as "mind-blowing", as evidenced by their fledgling collaboration with Wynn (NASDAQ:WYNN). If Zynga can successfully leverage Wynn's reputation and expertise as a gaming leader with the already addictive nature of their games, it could lead to a powerful franchise that might even justify its own company. It's not inconceivable that Zynga might choose to focus on this opportunity and perhaps spin off and try to sell the remaining "family friendly" portion to Facebook, who almost certainly wouldn't want the intense scrutiny that comes along with the stigma of gambling. Facebook certainly requires continued growth to justify their stock price even after the post-IPO plunge, and by purchasing Zynga as currently constructed, Facebook could immediately increase earnings by 50% for less than just the cash sitting on their combined balance sheets.

One can easily imagine any of these scenarios unfolding, which would almost certainly lead to a much larger market cap than the $4B Zynga currently sits at. The strength of their balance sheet and their current mobile gaming lineup should easily support that valuation, with free exposure to the burgeoning TV and online gambling opportunities dwarfing any potential downside due to temporary slowing in their established offerings. Like a player in their FarmVille game, I'm looking to plow some money into Zynga on any dip to set up the harvest of profits that the downpour of online gambling legalization would bring.

Source: Zynga Is The Top Dog In Social Gaming