Zinga's recent addition of a former online-gambling executive along with a low price/book ratio means ZNGA has considerable room to move upwards.
According to Morningstar, ZNGA currently has a price/book ratio of 1.3. A book value of 1.0 would indicate a stock is trading at a price that is equal to what that company's assets are worth on a per share basis, or about $2.37 in Zinga's case. So, this stock is trading down near the value of all their assets. That's pretty significant when you consider that the industry p/br average is 3.6 and the S&P 500 average 2.1. If ZNGA were trading at those ratios, the stock would be trading at $4.98 to $8.53 per share.
Obviously, trying to speculate on what online gaming will do for Zinga's bottom line is anyone's guess but it does lead one to believe that Zinga has plans for growth. Whether you choose to consider this upside potential or not, it appears Zinga is currently undervalued in the market.
Disclosure: I am long ZNGA.
Additional disclosure: I also plan to add more shares to my position in the next 72 hours.